Eni, Qatar said to hold talks for deal on giant Mexico field

By Amy Stillman and Chiara Albanese on 4/5/2018

MEXICO CITY and ROME (Bloomberg) -- Eni SpA is in talks to sell a stake in its giant oil discovery in Mexico to Qatar Petroleum International, according to people with knowledge of the plans.

The Italian oil major, which currently holds 100% of the offshore find in Campeche Bay and expects to start production in early 2019, would sell 20% to 35% to Qatar Petroleum, the people said, asking not to be named because the negotiation isn’t public. Eni is also in talks with other potential suitors, the people said.

Eni declined to comment, and Qatar Petroleum didn’t respond to calls and emails seeking comment after business hours.

Eni has sought to sell minority stakes in fields it operates to fund future development and support dividends, generating $9 billion in the last four years with the strategy it calls the dual exploration model. The Rome-based company, which has boasted record production and a string of discoveries including the giant Zohr gas field in Egypt, won the area in Mexico’s second-ever oil auction in 2015.

The deal would mark the first Mexico farm-out, a joint-venture in which help in developing an oil area is exchanged for a stake, by companies other than Petroleos Mexicanos since the country opened its oil industry to competition in 2013, ending three-quarters of a century of state monopoly over exploration and production.

Government change

Such agreements could become more common in Mexico. Presidential frontrunner Andres Manuel Lopez Obrador has said that he will stop holding oil auctions if he wins the vote in Mexico’s July 1 election, potentially leaving farm-outs among the only options to enter Mexican waters in future. China’s Cnooc Ltd. has also said that it will seek to farm out blocks that it won in Mexico’s first deepwater oil auction in 2016.

If negotiations are successful, Qatar Petroleum would hold an interest in an area comprising the Amoca, Mizton and Tecoalli shallow-water oil fields in the southern Gulf of Mexico, which Eni estimates may hold the equivalent of 2 Bbbl of oil.

The Italian driller has picked up blocks in subsequent tenders in Mexico, including a deep-water prospect in a partnership with Qatar Petroleum. For its part, Qatar Petroleum nabbed three other blocks in the same bidding round in January.

Eni is among a number of European drillers that have swarmed Mexico’s newly opened oil territory. An auction Last month saw blocks awarded to the UK’s BP Plc, France’s Total SA, Spain’s Repsol SA, Lukoil PJSC and DEA Deutsche Erdoel AG of Germany, among others. The next tenders, including one for onshore areas and another for shale, will be held in July and September, respectively -- prior to the end of President Enrique Pena Nieto’s term.

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