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US, Mexico reach accord on Transboundary Hydrocarbons Agreement

https://www.chemnet.com   Feb 21,2012 Platts
The United States and Mexico formally agreed Monday on how to assign ownership rights and royalties from cross-border hydrocarbons reservoirs in the Gulf of Mexico.

The Transboundary Hydrocarbons Agreement was signed in Los Cabos, Mexico, by Secretary of State Hillary Clinton and Mexican Foreign Minister Patricia Espinosa, with US Interior Secretary Ken Salazar, Mexican President Felipe Calderon and Mexican Energy Secretary Jordy Herrera in attendance.

The agreement covers revenue aspects of the two countries drilling into common reservoirs that straddle the maritime border. It also establishes safe drilling standards for oil and gas reservoirs that straddle the international boundary.

The agreement should make nearly 1.5 million acres (6,070 square km) of US Outer Continental Shelf more accessible for exploration and development, the Department of Interior said Monday in a statement about the agreement.

According to the Bureau of Ocean Energy Management, the area contains as much as 172 million barrels of oil and 304 billion cubic feet of natural gas.

The agreement establishes a framework for US offshore oil and gas companies and Mexico's Pemex to jointly develop transboundary reservoirs.

The agreement also opens up resources in the Western Gap that were off-limits to both countries under a previous treaty that imposed a moratorium along the boundary through 2014.

Under the agreement, US companies and Pemex will be able to voluntarily enter into agreements to jointly develop those reservoirs. In the event that consensus cannot be reached, the agreement establishes a process through which US companies and Pemex can individually develop the resources on each side of the border.

The agreement also provides for joint inspection teams from the Bureau of Safety and Environmental Enforcement and the Mexican government to ensure compliance with laws and regulations.

Relevant agencies on both sides of the boundary will review all plans for the development of transboundary reservoirs, and additional requirements may be set before development activities are allowed to begin.

The agreement should clear the way for development of 166 blocks along the border that were offered for sale in December, but which failed to receive any bids. Companies have shown an interest in the blocks, but have stayed away from the border area in the Western Planning Area, which stretches from South Padre Island along the Alaminos Canyon and the Keathley Canyon areas.

The transboundary blocks were in the "extreme depths of the Gulf of Mexico and those areas are still fairly wild frontier," Ben Waring, an offshore energy consultant, told Platts in December.

Companies are already dealing with recent changes in US regulations and likely did not want to take on new challenges with an uncertain outcome, he said.

Both countries have said the agreement is key to unlocking the area for commercial development.

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