“The agreement we sign today helps prevent such disputes. It also helps promote the safe, efficient, and equitable exploration and production of cross-boundary reservoirs. Each country maintains its own right to develop its own resources.
But this agreement creates new opportunities. And for the first time, American companies will be able to collaborate with Pemex, their Mexican counterpart. In tough times like these, we need to make the most of every opportunity to create jobs, to foster economic growth and energy security, while managing our resources and our environment responsibly for future generations.”
Hillary Rodham Clinton, US Secretary of State, 22nd February 2012
Until earlier this week, exploration of the area close to the US-Mexico maritime border was under an effective moratorium. In the 1970s, the two governments first broached the issue of exploiting the maritime border, and a treaty was drawn up. However, the US senate refused to ratify this treaty. The treaty that was eventually put into place in 2000 was known as the Western Gap treaty, and dealt with the shared boundary where deepwater hydrocarbon development was deemed possible. A 1.4 nautical mile buffer zone on each side of the boundary was agreed upon, and in this area a 10-year moratorium on commercial gas exploration was put into place. In 2010, Presidents Obama and Calderón extended this treaty, which was due to stand until 2014.
However, the new Transboundary Hydrocarbons Agreement effectively ends the Western Gap moratorium. The agreement lays out guidelines for the ownership and taxation of oil produced in the zone, and deals with the eventualities of cooperation agreements between Pemex and operators in the US Gulf, and what happens if agreements are not reached.
Importantly, one of the key features of the transboundary agreement is laying out safety cooperation. Only last week, we featured a post regarding safety concerns over deepwater exploration. This new accord will allow for joint inspection teams to ensure compliance with safety and environmental regulations, a key step in helping Mexico to learn how to deal with the worst-case scenarios that are so key to deepwater projects after the Macondo spill.
This agreement brings a conclusion to the project launched by both governments in 2010 to find a way to develop reserves close to the maritime border under an arrangement that respected the legal framework of both countries. However, the agreement will need to be ratified by both governments before it passes into law. Given the importance of energy in the 2012 presidential elections in Mexico, it will be interesting to see how the Mexican Congress receives the legislation. Also, given the public concern over deepwater drilling in the US, Congress and Senate might be hesitant for the electorate to see them pass a bill that will allow increased deepwater activity so soon after the Macondo accident.