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)

The state-controlled firm says that its new arm will have two shareholders. Ecopetrol Global Energy SLU, which is incorporated in Spain, will have a 99% equity interest, while Ecopetrol America Inc., incorporated in the United States, will have the remaining 1% equity stake. Both companies are owned by Ecopetrol S.A.

“This new subsidiary, the sole corporate purpose of which will be the exploration and extraction of hydrocarbons, will be responsible for the subscription and execution of the petroleum contracts in which Ecopetrol participates in Mexico, starting with the recently awarded Blocks 6 and 8,” said Ecopetrol in a statement.

This decision to form a Mexican subsidiary is part of Ecopetrol’s exploration strategy, the firm said. This builds on the two shallow-water blocks in Mexico, Blocks 6 and 8, that the company won the right to explore last month.

As it continues to open up its oil industry, Mexico put 10 holdings up for bidding in June. Ecopetrol will develop one of its new blocks, which has an area of 559 square kilometers, with PC Carigali Mexico, a subsidiary of Malaysian company Petroliam Nasional Berhad (Petronas).

The second block, Area 8, measures 586 square kilometers and will be developed with Mexican state-owned oil company Petróleos Mexicano (Pemex) as a partner. The Mexican government will receive an operating profit of 20.1%.

Photo: Ecopetrol headquarters in Bogotá, Colombia (Credit: Dvalencia)

The state-controlled oil company, through its Ecopetrol Global Energy subsidiary, was awarded partial control of two of the 10 holdings put up for tender by Mexico’s National Hydrocarbons Commission, which is overseeing the opening up of Mexico’s oil and gas sector after a decades-long public monopoly. Overall, this was the agency’s fifth auction since it began gradually bringing foreign investment to the sector in 2014.

Ecopetrol said that pursuing these projects is part of its strategy to diversify its exploration and production, which has included several offshore discoveries in the Gulf of Mexico and Colombian Caribbean in recent years.

The first block, Area 6, is a concession that measures 559 square kilometers and will be developed jointly with PC Carigali Mexico, a subsidiary of Malaysian company Petroliam Nasional Berhad (Petronas). The Mexican government will receive an operating profit of 65.19%, according to Ecopetrol.

The second block, Area 8, measures 586 square kilometers and will be developed with Mexican state-owned oil company Petróleos Mexicano (Pemex) as a partner. The government will receive an operating profit of 20.1%.

In a statement, Ecopetrol thanked the National Hydrocarbons Commission and its two partners on these projects, calling this “the beginning of a solid, responsible, and lasting relationship for the benefit of our countries and the shareholders of our companies.”

In the auction, Eni SpA of Italy also won three bids, the most by any individual company. Repsol of Spain, Royal Dutch Shell, and Total SA of France also made winning bids, the commission said earlier this week.