Unitization in Mexico’s oil and gas fields

Unitization in Mexico’s oil and gas fields

In July, Talos Energy LLC caused a stir in energy policy circles in Mexico when it announced that a reservoir on its block extended into a block held by Pemex. Normally, in such situations, the party into whose lease area the reservoir extends must show that it is commercial and could, in theory, be separately developed. In this case, the parties will negotiate an agreement to “unitize” their efforts, such that certain percentage of the reservoir is assigned to one party and the remainder to the other. This would mean that if Party A has 20% and Party B has 80%, then 20% of oil and gas production in Party B’s area (or anywhere in the unitized area) would be credited to Party A.

In Mexico, there is an ancient superstition about the so-called “Rule of Capture,” and in the Energy Ministry’s Regulatory Impact Statement dated October 12, 2017, it is explicitly stated that this rule is not appropriate in Mexico.

We have completed three reports on this topic:

MEI 858, a bilingual glossary of the terms and definitions used in the Ministry’s “Guidelines on Unitization”

MEI 859, a bilingual presentation of the Regulatory Impact Statement

PPP 10049, a critique of the ideas and data provided in the Impact Statement. We question the wisdom of the Ministry’s claim to be able to impose terms of unitization on the parties.

You may download sample pages from each of these reports below.

MEI 858 Download | MEI 859 Download | PPP 10049 Download

Contact us about accessing the complete reports. Call +1 (832) 434-3928 or email info@energia.com.

Written by

Mexico Energy Intelligence

Baker & Associates offers niche-market business and policy intelligence related to Mexico's oil and gas, power and chemical industries. Over 1,000 reports have been issued in the last 20 years. Subject matter expert and publisher George Baker, who directs the firm, has carried out consulting assignments starting in the late 1970s at the height of the Oil Boom in Mexico. He brings bilingual and bicultural skill-sets to understanding and responding to challenges of business and public policy, coupled with a deep familiarity with the history and idiosyncrasies of the Mexican operating environment.