OPINION: Talos Energy’s failure to strike a unitisation agreement with Pemex within the allotted timeframe has deeply negative implications for Mexico’s oil sector.

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Pemex has failed to drill wells on its own section of the Zama reservoir, but chief executive Octavio Romero Oropeza is wary of acknowledging Talos as the natural operator of the field, perhaps fearing the wrath of President Andres Manuel Lopez Obrador, also known as Amlo.

Talos and its partners have likely invested close to $500 million on the project, but the unitisation decision has fallen into the hands of an Energy Ministry that has no previous experience of such a process and may be inclined to bend its decisions to Amlo's monopolistic vision.

A bunching of commitment well deadlines over the next year or so provides a misleading impression of a sector seemingly abuzz with activity by international oil companies.

But interest in extending these campaigns is already waning due to the absence of new licensing activities since Amlo was elected in 2018.

Zama — a relatively straightforward shallow-water development for Talos — has been in limbo for two years now, when it could easily have been heading for first oil.

A decision to make Pemex operator — based on a vague notion that there are bigger discoveries to be made in the state-run company’s block — will send a shiver of panic among international players in the country.

If this happens, more Mexican offshore assets could be put up for sale, almost certainly spelling more decline for the sector.

(This is an Upstream opinion article.)