U.S., Mexico, reach accord on drilling below maritime border

The U.S. and Mexico reached an agreement Monday to cooperate on oil-and-gas development in waters along the nations’ maritime border in the Gulf of Mexico.

Signed at a meeting of G-20 nations in Los Cabos, Mexico, the agreement would set a process that U.S. companies and Mexico’s state-owned Pemex could use to jointly develop waters that straddle the maritime border. It would also provide for the U.S. and Mexican governments to do joint application reviews and safety inspections in cases of transboundary drilling, which would occur in an area where oil spills could affect both nations.

U.S. and Mexican officials said the agreement would give companies easier access to waters — including 1.5 million acres on the U.S. outer continental shelf — considered attractive for-oil and-gas development but long unexplored because of legal uncertainties over who has rights to the resources.

They said the accord provides guidelines that would let U.S. companies and Pemex resolve those uncertainties and let them work together on border-straddling oil-and-gas projects.

“This enables us to responsibly expand our domestic energy development,” Salazar said. “U.S. companies can now move forward with legal certainty which has been missing in this area.”

The agreement announced today also would lift a moratorium on waters in a buffer area known as the Western Gap that both nations put off limits for 10 years in a 2000 treaty. That moratorium was extended through 2014 after the Deepwater Horizon oil spill.

It stems from a May 2010 commitment between U.S. President Barack Obama and Mexican President Felipe Calderón. They said it would include safety insight from the 2010 spill, which started a month earlier. It wouldn’t take force until both nations’ legislatures, the Senate in the case of the U.S., sign off.

“We ought to be able to gather necessary political forces to get the ratification that is needed,” Salazar said

Mexico still faces the problem of how to get at the deepwater oil on its side of the Gulf border. Pemex lacks much of the technology needed for ultra-deep exploration and production.

Also Mexico’s constitution prohibits foreign companies from actually owning any of the oil they produce in the nation’s waters and on its lands, making many less eager to get involved.

“With this we all win, and we guarantee that our oil will be used to the benefit of Mexicans,” Calderón said Monday.

Tommy Beaudreau, director of the Bureau of Ocean Energy Management, said the accord would “respect” Mexico’s constitution.

If Pemex and U.S. countries can’t agree on how to jointly develop a boundary-straddling resource, another process would determine how each side could develop its share, Salazar said.

Sean Shafer, analyst with Sugar Land-based Quest Offshore Resources, said companies will need a few years to get permits and more leases and start drilling. But he said the area holds vast promise and some infrastructure is already in the vicinity, as evidenced by Shell’s already-producing Perdido hub project nearby.

The waters, concentrated in the western Gulf, are more oil-heavy than eastern Gulf waters, Shafer said.

“Right now natural gas prices are very low, so operators are more interested in the oilier stuff,” Shafer said.

The oil-and-gas industry hailed the announcement, in a rare moment of praise for the Obama administration, while using the occasion to urge the Interior Department to open new waters off the East Coast.

Although Obama has touted that U.S. oil production is at an eight-year high, industry groups such as the American Petroleum Institute argue his policies have hurt development offshore and on federal lands, instead crediting new technologies and rising production on state and private lands.

“The administration’s announcement with Mexico is a positive step that demonstrates the value of opening new areas to responsible and safe domestic offshore development,” Reid Porter, API spokesman, said in an email. “This shared announcement also shows the need for U.S. energy policy that emphasizes more domestic development — such as areas offshore Virginia, North Carolina and South Carolina — to maximize U.S. jobs and investment to energy development here at home.”

The waters belonging to the U.S. make up an area “larger than the state of Delaware,” Salazar said, and contain up to 172 million barrels of oil and 304 billion cubic feet of natural gas.

The actual amount is speculative until drilling actually starts, but could far outstrip the estimate, Shafer said.

“I’d say that’s a pretty conservative estimate,” Shafer said.

The Interior Department’s planned auction in June for the central Gulf include waters covered by the agreement. Beaudreau said the department plans to repeat what it did in a western Gulf sale in December, by taking bids but holding off on awarding the lease.

“We’ll hold those bids until a reasonable period to allow for finalization and implementation of the agreement, at which point we’ll award the lease,” Beaudreau said.

Mexico City bureau chief Dudley Althaus contributed to this story.

This story was last updated at 3:39 p.m.