Historic offshore lease near U.S./Mexico border to benefit South Texas

Dec 5, 2016, 2:50pm CST
INDUSTRIES & TAGS Energy, Manufacturing, Oil & Gas
A historic offshore oil lease near the U.S./Mexico border is expected to benefit ports and cities along the Texas Gulf Coast.

Earlier this morning, Mexico's Comisión Nacional de Hidrocarburos awarded BHP Billiton (NYSE: BHP) an offshore farmout for the deep water Trion oil field.

Located in the Gulf of Mexico about 120 miles southeast of Brownsville, the Trion field is roughly 8,200 feet deep and is believed to contain 485 millions of barrels of oil equivalent in reserves.

As part of sweeping and historic reforms, Mexico opened up its energy markets to foreign companies two years ago. The Monday morning award to BHP Billiton marks the first time in the 78-year history of Petróleos Mexicanos that the state-run oil company has entered into a partnership with a private company.

"This is a transcendental step where Pemex becomes a modern oil company of the 21st century," Mexico's Secretary of Energy P. Joaquin Coldwell said during a press conference.

BHP Billiton bid $624 million and 11.5 percent royalties beating British-owned oil company BP (NYSE: BP), which bid $606 million and 11.5 percent royalties. The $11 billion offshore project could go into production as soon as 2023.

The Mexican government is building out the Port of Matamoros to support Trion and other nearby offshore leases but South Texas Energy & Economic Roundtable President Omar Garcia said the award to BHP Billiton means jobs and opportunities for the Port of Brownsville and other nearby facilities on the U.S. side of the border.

A founding member of STEER, BHP Billiton has a large corporate office in Houston, offshore oil fields in Louisiana and thousands of acres of leases in the Eagle Ford Shale just south of San Antonio.

"This is welcomed news as the oil and gas industry continues to recover from lower commodity prices," Garcia told the Business Journal. "This will mean more job opportunities in Texas and additional job opportunities along the Texas Gulf Coast."

Pemex's longtime monopoly on Mexico's oil industry has meant that a full, private-sector ecosystem for oil field service companies never developed south of the border even two years into energy reforms, said Alejandra Bueno with the San Antonio-based Binational Energy Committee for the Asociación de Empresarios Mexicanos.

The Comisión Nacional de Hidrocarburos was keenly aware about the lack of Mexican-owned service companies for deep water projects and as a result, Trion and other deep water projects only require between three and eight percent local content in the exploration stage and between four and 10 percent in the production stage, said Bueno.

And with the Trion contraction lasting to up 50 years, Bueno said service companies and logistics companies from the Lone Star State are positioned to fill those very large gaps.

"This may very well represent an opportunity for service companies from Texas in terms of both jobs and expansions," Bueno told the Business Journal.