1 billion barrels of oil have been discovered in the Gulf of Mexico

Business Insider | Jul 17, 2017, 08.35PM IST

oil rig

REUTERS/Jim Urquhart

About 1 billion barrels of oil have been discovered off Mexico's coast, amid a glut of global supplies.

Premier Oil, a UK oil and gas company, said Wednesday that its Zama well was the first offshore exploration drilled by a private company in Mexico. Premier Oil partnered with Talos Energy and Sierra Oil & Gas.

The Mexican government in 2013 began constitutional reforms that ended the decades-long monopoly that the state-owned oil company Pemex had held, opening up the industry to foreign investors.

Last week's discovery capped a big day for Mexico's oil industry. Italian oil and gas company Eni raised the estimated amount of oil it discovered in March to 1 billion barrels. And, the Mexican government successfully auctioned 21 of 24 onshore oil fields to private companies, according to Bloomberg.

Premier Oil's well has a breakeven cost of around $25 per oil barrel, said Anthony Durrant, the CEO of Premier Oil, during a call with investors. "At that level, it would be a profitable project clearly," Durrant said.

Durrant said Premier Oil plans for the Zama well to be appraised in 2018 "to understand the full extent of our success here before we make any firm [capital-spending] decisions." The company on Thursday lowered its full-year capital expenditure guidance from $350 million to $325 million.

Premier Oil shares listed in London surged 29% last week following news of the discovery.

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