Russian Firm Buys Mexican Acreage In The Middle Of Ukraine Invasion  | Rigzone

Right in the midst of Putin’s invasion of Ukraine, Russia’s Lukoil is treating everything as business as usual and has just completed the acquisition of a 50 percent operated stake in the Area 4 project offshore Mexico.

Lukoil today announced the completion of this transaction, with the Mexican authorities approving the deal earlier this month. The transaction value amounts to $435 million, plus expenditures in the region of $250 million incurred since January 1, 2021.

The Russian independent oil and gas firm agreed to acquire the 50 percent operator interest in the Area 4 project in July 2021. It sees this region as a strategic one for its further growth and development of international upstream operations, which compliments its Gulf of Mexico portfolio.

Located 25 miles offshore in the Gulf of Mexico in shallow waters, the two blocks included in this project cover 22 square miles in total. The two blocks include the Ichalkil and Pokoch oil fields which hold around 564 million barrels of oil equivalent in recoverable hydrocarbon reserves, more than 80 percent of which is crude oil.

The production from the fields started late in 2021 and the current average daily oil production exceeds 25,000 barrels. The project will be developed in three phases with a target peak daily production rate at over 115,000 thousand barrels of oil equivalent.

The project was implemented under a PSC signed in 2016 for a period of 25 years with the right for an extension for up to 10 years. PetroBal is Lukoil’s partner in the project and holds the remaining 50 percent interest.

But it is now a question of how will this develop further due to the ongoing crisis in Ukraine. Although the U.S. – or NATO for that matter – has not opted for a military response, President Joe Biden has raised sanctions against Putin as a way of putting pressure on Russia.

Biden said on a press conference that he ‘authorized a new round of sanctions and limitations in response to Putin’s war of choice against Ukraine’ and that they were ‘purposefully designed these sanctions to maximize the long-term impact on Russia – and to minimize the impact on the United States’.

The sanctions are aimed at cutting off Russia’s largest banks and some oligarchs from much of the global financial system and preventing the country from importing American technology critical to its defense, aerospace, and maritime industries.

Following the announcement by Biden, Russia’s stock market fell more than 30 percent on Thursday, wiping out a huge amount of wealth. The new U.S. sanctions include harsh penalties against the two largest Russian financial institutions, which together account for more than half of the country’s banking assets.

A list of 13 major companies put under sanctions was announced by the Biden administration and includes companies like Sovcomflot, Gazprom, GazpromNeft, and TransNeft along with major financial institutions and banks. Their affiliates, subsidiaries within and outside Russia are not included on this list but were listed on another.

Worth noting, Igor Ivanovich Sechin – the CEO, Chairman of the Management Board, and Deputy Chairman of the Board of Directors of Rosneft, one of the world’s largest publicly traded oil companies, was also put on the sanctions list.

Lukoil is still in the clear, but no one knows what kinds of actions the U.S. or partner countries could take if the invasion of Ukraine escalates further.

It is also worth noting that the attack on Ukraine immediately spiked Brent prices over the $100 a barrel mark for the first time in eight years over fears regarding energy supply disruption.

To contact the author, email bojan.lepic@rigzone.com