EconomyFinancialFrance's Total leaves a deepwater block early

France's Total leaves a deepwater block early

The French oil company Total renounced in advance a contractual area in deep waters that it won during the oil rounds of the past six-year term.

The early termination procedure was announced this Tuesday at one of the sessions of the National Hydrocarbons Commission (CNH), the oil market regulator.

The company gave up the contractual area because it was commercially unviable. Total made the decision to abandon the field after drilling a well that proved unproductive. The company was developing the initial stage of exploration in the contract area located off the coast of Tamaulipas.

“Resignation is a normal process in the oil industry,” Commissioner Héctor Moreira said at the session.

The French company, which was developing this area in conjunction with Exxon Mobil, spent around 96 million dollars on the exploration of the area and made payments of close to 180 million pesos to the State, according to information from the regulator.

But by terminating the contract early and not complying with the minimum work program that it agreed to with the regulator, the French company paid a conventional penalty of 21 million dollars to the Mexican Oil Fund. Total’s contract was valid for 35 years.

“All this is part of the business that is taken in each of the areas. It is a business of uncertainty,” Commissioner Alma América Porres said at Tuesday’s session. Areas located in deep water are usually at higher risk than those located elsewhere, such as shallow water.

The French company gave notice of its resignation in the area since March 2020 to the regulator, but the Covid-19 pandemic delayed the processes to formally terminate the contract.

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