Talos Energy has received a two-year contract term extension and regulatory approvals from the National Hydrocarbons Commission of Mexico (CNH) for additional exploration activities on Block 7.

Block 7 is located in the offshore portion of Mexico’s prolific Sureste Basin. Talos is the operator of Block 7 in a consortium comprising Sierra Oil & Gas, Wintershall DEA, and Premier Oil.

Initially, CNH approved a two-year term extension under the consortium’s production sharing contract for Block 7. The extension was the first of its kind granted to a private company in offshore Mexico. In the succeeding week, the CNH approved the consortium’s modified exploration plan for Block 7.

The consortium has identified potential exploration targets on Block 7, including the Xlapak and Pok-A-Tok prospects, among others. These targets contain typical gross un-risked resources ranging between 75 and 150MMBoe each. They contain oil prospects targeting similarly-aged sands as those seen in the drilling campaign of the Zama discovery.

Under the terms of the Block 7 production sharing contract, the consortium needs to relinquish more than half of the acreage on the block upon obtaining the two-year term extension. However the Block 7 modified exploration plan, approved by CNH, retains the acreage covering all of the consortium’s identified potential exploration targets.

Talos president and CEO Timothy Duncan said: “The recent CNH approvals have provided Talos and its partners with the flexibility to continue optimising the potential of Block 7.

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“The consortium has significantly over-delivered on its commitments under the production sharing contract, and these approvals will give us the opportunity to continue to successfully develop the country’s resources.

“Finally, we believe these approvals, in combination with the significant increase in industry activity, are yet another indicator of the tremendous potential of the basin in the future.”

The consortium’s Zama asset, which has already been discovered and appraised, does not require any extension approval from the CNH to proceed to final investment decision and then to development.