Talos Energy Inc. on Monday reported successful results from the Zama-2 ST1 appraisal well at the Zama shallow water discovery in Mexico’s Sureste Basin.

Zama-2 ST1, a sidetrack from the Zama-2 appraisal well, is the second of three appraisal penetrations to be drilled at Zama by Talos and joint venture partners Premier Oil plc and Sierra Oil & Gas.

“Hydrocarbon flow was established without stimulation in two separate flow tests and achieved a combined rate of 7,900 boe/d,” 94% oil-weighted and 6% natural gas, said Houston-based Talos.

The production rate “confirmed our expectations that the Zama wells will provide exceptional productivity,” Talos CEO Timothy S. Duncan said, adding that, “we believe a peak production rate between 150,000-175,000 boe/d is achievable.”

Zama was discovered in 2017 at Block 7, which Mexico’s Comisión Nacional de Hidrocarburos (CNH), or national hydrocarbons commission, awarded to the Talos-led consortium in the inaugural Round 1.1 bidding process in 2015.

A total of 103 contracts awarded through CNH bid rounds between 2015 and 2018 are in effect. Rounds 2.2 and 2.3, conducted in 2017, were the first of the tenders to be dominated by natural gas-rich blocks.

Gas-heavy Rounds 3.2 and 3.3 have been postponed by President Andrés Manuel López Obrador, who is skeptical of the tenders and the 2013 market-opening energy reform that made them possible.

“In the next stage of the appraisal program, the Zama-3 appraisal well will be drilled to the south of the original Zama-1 exploration well and will assist in delineating the reservoir continuity and quality in the southern part of the field,” Talos said.

Duncan said Talos is working with Petróleos Mexicanos (Pemex) “on unitization prior to submitting a development plan to the regulator. Our goal is to reach final investment decision and first production as soon as possible.” Unitization merges all involved gas and oil leases into one contract.

Late last year the Block 7 consortium and Pemex signed a pre-unitization agreement to prepare for a possible shared discovery straddling the block and Pemex’s adjacent Amoca-Yaxche-03 area. Talos operates Block 7 with a 35% stake, while Premier holds 25% and Sierra has a 40% interest.

CNH in March approved the acquisition by Germany-based DEA Deutsche Erdoel AG of 100% of Sierra’s shares, making DEA one of the largest holders of exploration acreage in Mexico.

The Zama discovery is estimated to contain 400-800 million boe of technically recoverable hydrocarbons and is expected to start production by 2022 or 2023, DEA said Tuesday, adding that Zama is “one of the largest shallow water discoveries of the past 20 years globally.”

DEA also operates the onshore Ogarrio field in partnership with Pemex, and holds interests in ten exploration blocks in Mexico’s Tampico Misantla and Sureste basins. Combined, these two basins contain 79.5% of Mexico’s 3P (proved, probable and possible) natural gas reserves.

New CNH Guidelines

In related news, CNH said Monday new guidelines to streamline the approval process for oil and gas exploration and development plans have taken effect as of last Friday (April 12). The guidelines, which CNH approved in March, will shorten the maximum response time for approval of plans to 85 days from 120 days.

For operators seeking to modify plans already approved, the maximum time has been shortened to 35 days from 120 days. The new approval periods are in line with averages in jurisdictions such as Norway, the United States, Brazil and Canada, CNH said.

López Obrador has argued that slow turnaround for project approvals has hindered Pemex’s ability to advance new projects.

Pemex CEO Octavio Romero Oropeza said in December the company planned to bring 73,000 b/d of production online by the end of 2019 through the accelerated development of 20 fields. To date, CNH has approved only four of the 20 development plans.

A total of 111 upstream contracts awarded under the reform are in effect, along with 415 areas allocated to Pemex through the Round Zero process, which preceded the bid rounds. As of February, CNH had approved 34 exploration plans and 56 development plans pertaining to the contracts and allocations.