Russian oil producer Lukoil has agreed to pay $435 million and additional unspecified incurred development costs to acquire a 50% operating stake in two Mexican shallow-water blocks from US independent Fieldwood Energy.
The blocks are part of the Area 4 project in the Gulf of Mexico and host the Ichalkil and Pokoch fields.

Lukoil said the two fields hold estimated recoverable reserves of 564 million barrels of oil equivalent, of which 80% is understood to be crude.
The Area 4 project is implemented under a 25-year production sharing agreement signed in 2016.
Lukoil’s partner in the development is PetroBal, an oil and gas subsidiary of Mexican conglomerate GrupoBAL.
PetroBal recently secured a $250 million development finance facility, the first instance of reserves-based lending for a production sharing contract in the country.
Texas-based Fieldwood Energy, on the other hand, filed for Chapter 11 bancruptcy protection in August 2020.
Area 4 development plan
According to a development plan for Area 4 approved by Mexico’s National Hydrocarbon Commission (CNH) in June, oil production at the two blocks is set to surge from zero to about 40,000 barrels per day of oil during the second half of this year.
The production peak of more than 60,000 bpd is anticipated for 2023.
The first phase involves the installation of two production platforms at Ichalkil and Pokoch, which will send output to the Tumut-A platform for processing.
Tumut-A, previously operated by Mexican state company Pemex, stands idle several kilometres away from the two fields.
A second development phase is planned to begin in 2026, with the aim of inceasing total output to more than 90,000 bpd between 2027 and 2029.
The acquisition will turn Lukoil into a producer in the Gulf of Mexico, as until the acquisition, the Russian company has been predominantly involved in exploration projects in Mexico.
Lukoil’s major partner in Mexico offshore blocks 10, 12, 14 and 28 is Italy’s Eni. The Italian major is operator of blocks 10, 14 and 28, while the Russian company operates Block 12.
Lukoil also holds a 50% interest in a service contract signed in 2015 to rehabilitate the Amatitlan offshore block in partnership with Canada’s Renaissance Oil.
However, progress on Amatitlan has been slow because of the Covid-19 pandemic, which delayed efforts of both companies to negotiate an expanded development plan for the block and migrate from the service contract to “a mutually beneficial contract structure for all partners”, according to a recent Renaissance Oil financial statement.

Lukoil has seen limited growth opportunities in Russia because of its private ownership structure, and has been actively looking for options to enter into projects elsewhere in the world despite the global push for decarbonised energy.
The Russian company said the completion of Contract Area 4 acquisition is still subject to certain conditions, including approval by the Mexican authorities.