MercoPress. South Atlantic News Agency

Falklands' Premier secures two blocks in Mexico's oil industry privatization

Mexico’s oil and gas privatization process began with shallow offshore assets; the licenses are in waters off the states of Veracruz and Tabasco

Premier Oil, with strong involvement in the development of the Falkland Islands' oil and gas industry is among the winners in the first round of Mexico’s oil and gas privatization. The two licences secured by the London listed oil firm’s consortium were the only assets successfully auctioned by the Mexican authorities.

 Sierra Oil & Gas, a new vehicle backed by the Riverstone private equity group, led the winning consortium which secured blocks 2 and 7 ahead of rival bids from Norway’s Statoil and a group led by Italy’s ENI.

Talos Energy is an independent exploration and production company focused on acquiring assets in and around the Gulf Coast and the Gulf of Mexico regions.

Notably, American ‘big oil’ groups like ExxonMobil and Chevron stayed away.

At total of 38 oil and gas companies qualified for the process, but less than half of them (only 14) participated. Bids were made for other blocks but the terms fell short of the government’s minimum threshold.

Mexico’s oil and gas privatization process began with shallow offshore assets; further auctions will take place for deep-water and onshore projects.

A total of fourteen licence blocks were made available in this initial round, and the government had expected to secure up to US$17bn of investment into its oil industry through the initial auctioning process; that has forecast has now reduced to US$2.6bn.

Reportedly the Mexican authorities would have viewed disposal of 30% to 50% of the assets as the minimum benchmark for success; selling two blocks actually represents about 15%.

Premier’s new assets are in the waters off the states of Veracruz and Tabasco, and like all blocks on offer they are located in shallow water.

Sierra and Talos each have 45% of the assets initially, with Premier having a 10% interest; however, the FTSE 250 oil firm has the option to increase its stake to 25% by funding more of the future drilling costs.

The first exploration phase will see the partners acquire, evaluate and re-process 3D seismic data in order to firm up possible drilling locations before the end of next year.

Premier told investors that Blocks 2 and 7 both contain numerous leads in both established and emerging plays in the Gulf of Mexico.

”Premier is pleased to announce that it, together with its joint venture partners Talos Energy (operator) and Sierra Oil & Gas, has been awarded Blocks 2 and 7 in Mexico's Round 1 held in Mexico City on 15 July. The Blocks contain numerous leads in established and emerging plays, located in the shallow water Sureste Basin, a proven and prolific hydrocarbon province in the Gulf of Mexico“, said a release from Premier.

Blocks 2 and 7 contain Tertiary clastic plays, typical of the Salinas sub-basin. The forward plan is to acquire, evaluate and reprocess 3D seismic data with a view to firming up drilling locations towards the end of 2016.

Premier CEO Tony Durrant commented: ”We are very pleased with the outcome of this round which provides Premier with a low cost entry point to emerging plays in a proven oil and gas province.”