Lukoil Strengthens Mexican Project Base

Russian multinational oil and gas company Lukoil strengthened its commitment to the Mexican oil and gas market after it bought the bankruptcy-threatened Fieldwood’s 50 percent stake in Mexico’s shallow water project Area 4. The operator is already present in Area 10, 12, 14, 28 and Amatitlan.

By acquiring Fieldwood Energy’s holding company for US$435 million plus expenditures incurred in 2021, Lukoil now holds half of the Area 4 project. The remaining 50 percent is in hands of PetroBal, a subsidiary of Grupo BAL. Area 4’s 25-year sharing agreement was originally signed in 2016 and includes a right for an extension for up to 10 years. Fieldwood Energy filed for bankruptcy in 2020 but has since won approval for a plan to reorganize the company and restructure its debt.

The 58 km2 Area 4 project includes two blocks, found 42 kilometers offshore in the Guld of Mexico at a depth between 30 and 45 meters. The oil fields within the block include Ichalkil and Pokcoh and amount to 564 MMBOE. Eighty percent of this is crude oil.

First oil production is scheduled for 3Q21, as production facilities are being finalized. Lukoil said the project is to be developed in three stages. Peak daily production is estimated at 115 MBOE.

The Russian operator entered the Mexican market in 2015, soon after the 2014 Energy Reform made such an entry possible. With its presence in six Areas through farmouts and joint ventures, it is building a significant future production portfolio in the country. For example, Lukoil signed several agreements with Eni, including shallow water blocks 10, 12 and 14. According to this Agreement, Lukoil assigned 40 percent in Block 12 to Eni, but it retains the remaining 60 percent stake and is the operator for that reason. Eni assigned 20 percent in Block 10 as well as in Block 14 to Lukoil, operating these projects itself.

"Lukoil considers Mexico a strategic region for the development of our international upstream operations. The new project, where we will be the operator, is notable due to its considerable explored reserves and significant production potential. It naturally complements our existing portfolio of projects in the Gulf of Mexico", said Vagit Alekperov, President of Lukoil.

Partners of JVs with Lukoil have spoken about being satisfied when it comes to their cooperation. “Lukoil has been a strong, steady and professional partner for Renaissance on the Amatitlan block in Mexico. Lukoil delivers on its promises, is very transparent and has a strong commitment to Mexico with several offshore licenses,” said Craig Steinke, CEO of Renaissance Oil Corp. to Mexico Oil & Gas Review.