- BHP Billiton presented the best proposal for the farmout through a USD 624 million additional contribution to the USD 570 million minimum.
- The achievement of Pemex’s first farmout today marks a historic day for Pemex and for Mexico.
- The Ministry of Energy, the Ministry of Finance and Public Credit and the National Hydrocarbons Commission sharply executed the auction.
- Through this joint venture, Pemex will develop an USD 11 billion deepwater project implementing the best international standards across the industry.
Today is a historic day for Mexico and for Petróleos Mexicanos. After 78 years operating by itself, Pemex will carry out an E&P project through a farmout, as a result of the new business schemes brought forward by President Peña Nieto’s Energy Reform. Today’s achievement marks the beginning of a new era for the company and proves that Pemex is an attractive and reliable partner to invest in Mexico.
Following a transparent process carried out by the CNH, BHP Billiton was awarded the Trión block after offering an additional royalty of 4% over the 7.5% base royalty. Through the 11.5% royalty, the State guarantees oil revenues. Furthermore, BHP Billion also offered an additional contribution of USD 624 million, above the established minimum. This amount will account for the required investment on behalf of the partner, before Pemex is required to make any additional investments. In that sense, Pemex would be allocating resources in approximately four years.
BHP Billiton will have a 60% stake and will be the operator of this consortium. Our partner is based in Melbourne, Australia, with operations in over twelve countries, with average production of 600 thousand barrels of oil equivalent per day and sales of more than USD 30 billion.
The expected investment for this project is nearly USD 11 billion. Investments will be required as of next year, and will be allocated to works focused on attaining a deeper understanding of the subsoil. The exploratory studies and wells will provide more certainty of the Trión field’s 3P reserves, currently estimated by Pemex at 485 million barrels of oil equivalent, and likely to be increased.
Initial production is expected by 2023, and to reach its plateau by 2025, at nearly 120 thousand barrels of oil equivalent per day.
Pemex recognizes the result of the auction as a complete success, since prices of oil continue to trade relatively low, the development of deepwater fields involves significant geological and financial risks, and companies were still keen on partnering with Petróleos Mexicanos. The United States’ Bureau of Ocean Energy Management auctions exploration and extraction blocks within its Gulf of Mexico area, and up until 2015, the percentage of areas assigned was 9%, however, in 2016 only 1.7% of areas were assigned.
With regards to joint venturing, Petróleos Mexicanos has reached a milestone set forward in its business plan and the Energy Reform, allowing its operations to comply with best international standards, gain additional know-how and expertise in order to boost its results.
Petróleos Mexicanos has grown from this process and will serve as leverage to improve the outlook of future farmouts within the Perdido Fold Belt area and have a positive impact in the regional economic development of the state of Tamaulipas.
Pemex will sign a Joint Operations Agreement with BHP Billiton and a license contract with the CNH, within the next 90 days.
Pemex emphasizes its commitment with Mexico, and will continue to work on consolidating itself as the most important company in the country.
All of the above implies that the Mexican State (Mexican Oil Fund, Ministry of Finance and Public Credit and Pemex) will receive 72.2% of the project’s revenues.
Trión is located within the Perdido area, in the deepwaters of the Gulf of Mexico, near the Mexico-U.S. border.
Entitlements/assignments AE-0092 and AE-0093 are adjacent to some of the areas auctioned in Round 1.4.
The block auctioned covers 1,284 km2 and includes the Trión field, and at least three other exploratory prospects.