Russia’s oil company Lukoil has agreed to acquire a 50% operatorship stake in the Area 4 project in Mexican shallow waters for $435m.

The deal also includes expenditures incurred on the project this year as of the transaction closure date.

The stake to be acquired by the Russian firm corresponds to that of Fieldwood Energy, which entered bankruptcy last year.

Made up of two blocks spanning 58km² in total, the Area 4 project is being implemented under a 25-year production sharing agreement.

This agreement was signed in 2016 by a consortium of Petrobal and US-based Fieldwood Energy. It provides the participants with the right to an extension for a maximum of ten years.

PetroBal is the oil and gas subsidiary of Mexican conglomerate GrupoBAL.

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By GlobalData

Upon completion of the deal, Lukoil and PetroBal will have equal shares in the Area 4 project. Lukoil will serve as the operator.

Lukoil president Vagit Alekperov said: “Lukoil considers Mexico a strategic region for the development of our international upstream operations. The new project, where we will be the operator, is notable due to its considerable explored reserves and significant production potential.

“It naturally complements our existing portfolio of projects in the Gulf of Mexico.”

The closing of the deal is subject to approval from the Mexican authorities and certain other conditions.

Located 42km off the Mexican coast in the Gulf of Mexico, the Area 4 project comprises two shallow-water oil and gas fields, namely Ichalkil and Pokoch.

According to Lukoil, the two fields have combined recoverable hydrocarbon reserves of 564 million barrels of oil equivalent, comprising more than 80% crude oil.

It is expected to have a peak daily production capacity of more than 115,000 barrels of oil equivalent.

Being developed in phases, the Area 4 project is expected to commence production in the third quarter of this year.