Talos: Zama investment decision on track for next year

US oil company Talos Energy is on track to finalize a field development plan for the Zama field in Mexico despite its ongoing unitization dispute with Pemex Exploración y Producción (PEP), the upstream unit of federal company Pemex.

Tim Duncan, CEO of the Houston-based O&G player, provided this and other details on the Zama project, presenting an update to investors at the Barclays CEO Energy Power Conference in New York on Wednesday.

Duncan said Talos hopes to have the development plan ready by March 2023, and hydrocarbons regulator CNH will need to greenlight the plan before a final investment decision (FID) can be made.

He added that the project’s partners are discussing the formation of an integrated project team. Other partners include PEP and two private consortiums, Premier Oil (owned by Harbour Energy) and Sierra Oil (owned by Germany's Wintershall).

The project update comes roughly one month after Duncan spoke about the conflict with PEP. “Our situation is a proxy for everything you don’t want to see happen, which is investing under a certain set of conditions, developing an asset that had a specific amount of value, to not knowing exactly what you have, due to government action," he was quoted as saying by Bloomberg.

At the Barclays event, Duncan outlined progress to date on the project, saying four exploration wells at block 7 suggest there are resources of more than 700Mboe (million barrels of oil equivalent), with other estimates going as high as 850Mboe.

Zama is the largest discovery made to date by a private sector company in Mexico, following the 2013-14 energy reforms, and considered one of the 10 largest oil discoveries in the country's history.

Duncan said about US$111mn has already been invested in the project, adding ongoing expenses will remain minimal until Talos approves an FID.

“Zama’s expected value is multiples of invested capital to date and Talos has broad strategic optionality to ultimately realize that value,” the company said in the presentation.

Talos continues to resist the unitization resolution of late March that gave the company only a 17.35% non-operating working interest in the project, giving Pemex control.

In September last year, Talos filed notices of dispute to the government of Mexico under the USMCA and BLEU-BIT trade treaties in an attempt to advance negotiations regarding operatorship.

Source: Talos