Mexico’s Pemex will team up with BHP Billiton to develop the Trion oil field in the Gulf of Mexico as the state-owned oil company embarks on its first exploration and production joint venture with a private partner.
BHP edged the UK’s BP in the first of 11 auctions of deepwater oil blocks scheduled for Monday.
The auctions, the first ever in Mexico, are part of the government’s effort to attract investment from global oil giants like Exxon, BP and others to help jumpstart production in the country’s offshore oil fields. The auctions also come at a time when Pemex is undergoing a broad restructuring as it struggles to reverse an 11-year drop in oil production.
Located near the US side of the Gulf of Mexico, the Trion oil field is estimated to hold some $485m of commercial reserves. Mexican authorities expect it will cost some $11bn to develop the field, which is part of a larger area known as the Perdido trend, with production to start around 2023.
In the Trion auction, BHP and BP both submitted offers with the maximum additional royalties of 4%. However, BHP offered a cash payment offer of $624m, compared to $606m from BP.
Under the terms of the auction, BHP will take a 60% stake in the project and make a $570m investment.
“We see attractive potential in Trion and the Perdido trend and we are pleased to have the opportunity to further appraise and potentially develop this prospective frontier area of the deep-water Gulf of Mexico,” Steve Pastor, president of BHP Billiton petroleum operations, said in a statement.
In other bids, China National Offshore Oil Corporation (CNOOC) beat Pemex to win two blocks in the Perdido Fold Belt. CNOOC was awarded Block 4, which Mexican officials say contains more than 540m barrels of oil equivalent in proven, probable and possible reserves.