MEXICO CITY—Mexico's first-ever deepwater contracts in its Perdido Fold Belt on the Mexican side of the Gulf of Mexico (GoM) were signed last week. The Chevron Corp.-led consortium, together with national oil company Pemex and Japan's Inpex, have earmarked exploration for Block 3. And Pemex's unprecedented farm-out with BHP Billiton Ltd. (NYSE: BHP) at Trion is a go.

The first came early last week. The 35-year contract for Block 3 is one of the country's four Perdido deepwater blocks in Round 1. It's located in an area off the coast of Tamaulipas state, about 45 miles into Mexico's Perdido in water depths ranging from 1,640 ft to 5,575 ft.

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The initial four-year exploration period will see investments on the order of MX$100 million (US$5 million), Pemex said. Block 3 is expected to hold nearly 371 million of light to superlight risked barrels of oil in a 1,687 sq-km area. If exploration is successful, total investments are expected to reach US$2 billion to begin producing 50,000 barrels per day (Mbbl/d) by 2027.

"The execution of this contract represents an important milestone in our ongoing, strategic partnership with Pemex, Inpex and Mexico," said Ali Moshiri, president of Chevron Africa and Latin America, at the contract signing ceremony in Mexico City.

Chevron (NYSE: CVX) is the operator for the consortium, while Pemex and Inpex each hold 33.3% working interest. Royalties are capped at 4%.

And just northeast of Block 3 sits Trion, one of Pemex's first deepwater discoveries. Back in 2012, the state-owned company drilled its first and luckily successful well. And now with BHP Billiton, the field's estimated 485 MMboe of 3P reserves are to be developed over the coming years.

The 1,285 sq-km area is about 25 miles south of the U.S. maritime border, where Royal Dutch Shell Plc's (NYSE: RDS.A) Perdido hub has proven fruitful.

"It is an honor to be the first foreign company to partner with the people of Mexico in developing their significant petroleum resources for mutual benefit," said Andrew Mackenzie, BHP Billiton's CEO.

BHP Billiton will be the operator and holds a 60% working interest at the two delimited blocks within the Trion area, AE-0092 and AE-0093. Pemex would keep the remaining 40%.

The minimum work program is estimated at US$320 million and consists of one appraisal and one exploration well and the acquisition of additional seismic data.

"We have a long history as a top operator in the Gulf of Mexico and we are excited to bring our operational expertise to the partnership with Pemex," said Steve Pastor, president of operations at BHP Billiton.

The company expects its Trion development to become one of the top 10 fields discovered in the GoM over the past decade. The contract prescribes 4% royalties on revenues for BHP Billiton.

Additionally, current contracts spell out relatively low local content requirements capped at 8%.

According to the Ministry of Energy's updated 2015-2019 E&P plans, deepwater acreage still holds over 6 MMboe of prospective resources.

Pedro Joaquín Coldwell, the energy minister, announced two upcoming deepwater tenders last week. These should be part of the fourth segment of Round 2 and the second segment of Round 3 before end-2018. The first set will be awarded by the first week of December of this year, he said at a press conference.

While Mexico is gearing up to be an international destination for deepwater exploration, the role of its emerging offshore regulator, ASEA, is yet to be seen. However, industry expectations of Mexico’s potential are clearly setting the stage for unprecedented development.

Offshore