A pipeline network with spare capacity could allow Mexico to export oil and gas from its flagship offshore Trion project to the United States, the head of Mexico’s oil regulator said on Thursday.

The deep water Trion development, with prospective reserves of almost 500 million barrels of oil, was farmed out in December by state-run Pemex to Australia’s BHP Billiton , which became the operator of the $11 billion project.

The ailing Mexican oil firm, which kept a 40-percent stake, jointly shares for the first time the risks and rewards of a potentially lucrative project with a private producer.

Although a development plan has yet to be submitted, the consortium could use a cheaper and quicker option of getting production to the United States by using pipelines that serve the neighboring Great White field on the U.S. side of the Gulf of Mexico, Juan Carlos Zepeda, head of the national hydrocarbons commission (CNH), said on the sidelines of CERAWeek energy conference in Houston.

The Great White field, which is operated by Royal Dutch Shell Plc, BP Plc and Chevron Corp, is producing around 70,000 barrels per day (bpd), leaving 50 percent available capacity in a crude line and a gas line connected to the U.S., Zepeda said.

“There are only 39 kilometers (24 miles) from the Trion field to the Great White’s facilities,” Zepeda told Reuters, noting that building a pipeline to Mexico’s shore would be more expensive and would take more time.

The pipelines from Great White field on the U.S. side of the Perdido Fold Belt, the world’s second-deepest oil and gas production hub, are operated by U.S.-based Williams Companies as part of its 1,370-mile (2,200-km) network of gas and crude lines in the Gulf of Mexico.

Other options for Trion production include building pipelines to the nearest ports, most likely Mexico’s Tampico or Brownsville in Texas, or setting up a Floating Production, Storage and Offloading (FPSO) facility to handle the output.

Another block awarded to Pemex and China’s state-controlled offshore oil producer CNOOC, which in December gained a foothold in Mexico’s deepwater, is even closer to Great White.

“The (Pemex and BHP) consortium must submit an appraisal in the coming 180 days, including test wells, to confirm the field’s extension and then a development plan must also be submitted,” Zepeda said.

Early production of light crude from Trion is expected for 2023, Pemex’s director Jose Antonio Gonzalez Anaya said earlier this week in Houston.

“For Pemex this is historic deal. For 80 years, Pemex never had a partner with whom to share risks or equity,” he said.

The project had been put aside in early 2016 due to the company’s budget cuts and resumed nine months later as part of Mexico’s long-waited oil reform.

MORE LICENSES COMING

The CNH, which oversees contracts and runs oil auctions in Mexico, is offering 15 blocks for exploration and production in shallow water under profit sharing agreements and 26 onshore blocks under licenses, with results expected in June and July.

A new deep water bidding round in the coming months is expected to offer blocks mostly in the same basins of Perdido and Salina. As in previous offshore auctions, licenses will be offered by the government to operate these blocks, Zepeda detailed.

The last bidding round in the short term will be the first for so-called unconventional resources.

Onshore blocks with shale oil and shale gas reserves close to the Eagle Ford basin in Texas will be offered, as well as areas in the Tampico Misantla formation, which is estimated to hold some 35 billion barrels of oil, mostly in shale rock.

 

 

Reporting by Marianna Parraga in Houston. Additional reporting by David Alire in Mexico City; Editing by Marguerita Choy / Reuters

March 9