Ecopetrol Signs Contracts to Formalize Exploration Bids in Mexican Waters

Last week, Colombian state-controlled oil company Ecopetrol (NYSE: EC) signed two contracts to formalize the joint exploration bids it won in June to look for oil off the coast of Mexico.

This marks the first exploration efforts in Mexican waters for the Bogotá-based giant, which this year has pushed to replenish its waning reserves by searching for new discoveries both on and offshore.

Along with partners Pemex and a subsidiary of Petronas, Ecopetrol is now poised to begin exploration efforts in Area 6 and Area 8 off the coast of Mexico. (Credit: Ecopetrol)

In one of the major auctions held since Mexico opened up its oil sector following nearly a century-long state monopoly, Ecopetrol teamed up with Mexican state oil giant Pemex to win a bid for one shallow water exploration block and partnered with PC Carigali México, a subsidiary of Petronas of Malaysia, on another block.

Ecopetrol will explore the 559-square-kilometer “Area 6” block with PC Carigali México and the 586-square-kilometer “Area 8” block with Pemex.

The companies have not publicized an exact timeline of when these efforts will begin, but the signing signals the start of the formal process.

To oversee its efforts in the country, Ecopetrol formalized the creation of its new Mexican subsidiary, ECP Hidrocarburos México S.A. de C.V., in August. The offshoot is based in Mexico City.

“We are very pleased with the arrival in Mexico, a new milestone in the history of Ecopetrol, which is part of our strategy to strengthen and diversify exploration and production activities in Colombia and abroad,” said Felipe Bayón Pardo, president of Ecopetrol SA.

Bayón, who took over as head of Ecopetrol in August after Juan Carlos Echeverry stepped down, was joined at the signing by representatives of both Pemex and Petronas as well as Mexican Energy Secretary Pedro Joaquín Codwell and Mexico’s National Hydrocarbons Commission President Juan Carlos Zepeda Molina.

In addition to looking for more oil in Mexican waters, Ecopetrol has also ramped up its exploration efforts in the Colombian Caribbean and the Gulf of Mexico through its Ecopetrol Americas division. Among its partial offshore holdings in the area are the Gorgon, Purple Angel, Kronos, Gunflint, and Warrior wells, each of which are either already in production or have proven oil or gas reserves.

These type of plays will continue to be a key component of Ecopetrol’s strategy, according to the company. After spending recent years looking to rein in costs and improve operational efficiency in response to the global plummet of oil prices, Ecopetrol planned to more than double its exploration investment this year compared to 2016.

Photo: Felipe Bayón Pardo (far right), president of Ecopetrol SA, signs the paperwork for the exploration blocks that the company won in tandem with Pemex and Petronas earlier this year. (Credit: Ecopetrol)