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Germany’s DEA to buy Mexico’s Sierra oil and gas

Germany's DEA to buy- GBO

The German energy firm announced that it had signed an agreement to buy independent Mexican company Sierra Oil and Gas at a time of growing uncertainty over the private sector’s role in Mexico’s oil industry

On taking office, veteran leftist and self-professed oil nationalist Andres Manuel Lopez Obrador pledged a shift away from the previous government’s drive to attract private capital to the oil and gas sector. The acquisition of Sierra should boost the German firm’s presence in Mexico ahead of DEA’s planned merger next year with Wintershall, the oil and gas unit of chemicals giant BASF.

In a statement, DEA Chief Executive Officer Maria Moraeus Hanssen stated that the acquisition of Sierra would provide DEA with a “high-quality exploration and appraisal portfolio in one of the world’s most sought-after offshore basins.”

“The transaction also underlines our confidence in the future of Mexico’s energy industry,” she further added.

Terms of the deal were not disclosed, though the company said it expected to close in the first half of 2019. The Financial Times, which first reported the deal, stated that the transaction was worth around $500mn.Hamburg-based DEA and Sierra have both won rights to develop blocks in the oil and gas auctions Mexico held under the country’s previous president, Enrique Pena Nieto.

Lopez Obrador has been a trenchant critic of Pena Nieto’s opening of the oil and gas market to foreign and private producers. He was stated that while contracts awarded under Pena Nieto will be respected, provided there is no evidence of corruption, he vowed last week that the energy plan rolled out in the “neo-liberal period” would not be carried out.

By acquiring Sierra, DEA will hold interests in one onshore production block and ten exploration blocks, including the Zama shallow water discovery, the company said in its statement.

Those would attract “significant investments from DEA and its joint venture partners” over the next five years, it added.

Sierra holds a 40% stake in the block where the Zama discovery was made, but does not operate the project.

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