The Week in Oil and Gas: International Tension Causes Prices to Climb

US-Iran Tensions

The Iranian response to the assassination of Major General Qasem Soleimani by the US military has caused global oil prices to climb. On the first Friday of the year, prices hit a three-month high, while on Tuesday, the price for Brent crude closed at US$65.36 per barrel. Meanwhile, West Texas Intermediate prices closed at US$63.05 per barrel.

Zama gets Contingent Reserve Estimates

Consulting firm Netherland, Sewell and Associates has concluded that American operator Talos Energy holds in its Block 7 contracted area some 60 percent of the resources to be exploited at the Zama mega reserve. The consulting firm, contracted by Talos to carry out the assessment, said that the reserves accessible to Talos are around 670MMboe in 2C reserves. The American company is still in talks with PEMEX over the unification of Zama, which crosses blocks operated by both companies.

Cost of Mexican Oil Exports Hedge Revealed

Gabriel Yorio, Deputy Minister of Finance and Public Credit, has said that it cost Mexico around US$1 billion to protect the value of its oil exports in 2019. The hedging secured the price of every barrel of oil exported by Mexico at a minimum of $49 in the event of a sharp decline in oil prices. Yorio also explained that a different hedging structure would be reworked for 2020 as different considerations, including updates to maritime transport legislation, had come into play.

Oil’s Contribution to Mexican Public Finances Falls

The Ministry of Finance and Public Credit this week released data illustrating the oil’s declining input into Mexico’s public finances. Across 10 years, the oil industry’s contribution has fallen 17.5 percent from some MX$1.45 trillion (US$77.1 billion) – representing 34.7 percent of the entire public purse – to around MX$843 billion ($44.8 billion).

AMLO to Divert the Tuxpan-Tula Pipeline

The Tuxpan-Tula Pipeline being constructed by TC Energía and suspended since 2017 will be diverted, says President Andrés Manuel López Obrador. The pipeline construction was suspended by a judge in 4Q17 to protect the collective rights of communities in the states of Puebla, Veracruz and Hidalgo. The president has stated his intention to formally divert the pipeline to ensure that land considered of extreme importance to local indigenous groups is not impacted.

The president told an audience in San Pablito Pahuatlán in the state of Puebla that the government will propose alternative routes for the pipeline regardless of the cost this may incur.