U.S. Secretary of State Hillary Clinton and Mexican Foreign Minister Patricia Espinosa signed an agreement today for development of oil and gas reservoirs that straddle the two nations’ boundaries in the Gulf of Mexico.
The agreement is the first of its kind signed by the U.S., establishing a legal framework and creating incentives for U.S. energy companies to develop oil and gas resources jointly with Petrolleos Mexicanos, the Mexican state oil company known as Pemex. When it comes into force, the agreement will end the current moratorium on oil exploration and production in the Western Gap portion of the Gulf of Mexico.
“These reservoirs could hold considerable reserves that would benefit the United States and Mexico alike,” Clinton said at the signing ceremony in Los Cabos, Mexico, on the sidelines of an informal meeting of Group of 20 foreign ministers. “But they don’t necessarily stop neatly at our maritime boundary. This could lead to disputes if a company discovers a reservoir that straddles the boundary — disputes, for example, over who should do the extraction and how much they should extract.”
If no joint exploration deals are made between U.S. companies and Pemex, the agreement allows each side to exploit its share of hydrocarbons while protecting the other nation’s interests, according to the U.S. State Department.
The agreement also allows for joint inspection teams to ensure compliance with safety laws and environmental regulations.
A shortage of investment in technology, exploration and production, and a ban on private-sector involvement has hindered Mexico’s petroleum production in recent years. Mexican law banned private companies from exploring, producing and refining crude oil until energy legislation championed by President Felipe Calderon passed in 2008, allowing performance-based service contracts.
Calderon’s government has said deep-water offshore exploration and production in regions such as the transboundary area may be Mexico’s best chance to reverse declining output from the country’s largest reserves.
Mexico was the second-largest source of U.S. oil imports in 2010, exporting 1.3 million barrels a day to its northern neighbour, according to the U.S. Energy Information Administration.
The oil sector generated 14 percent of Mexico’s export earnings in 2010, according to Mexico’s central bank, while oil earning account for 32 percent of Mexican government revenue, according to the EIA.
At the G20 meeting yesterday, Clinton called on developed and emerging economies to eliminate unfair advantages in the global financial and trade systems, such as those enjoyed by state-owned enterprises and sovereign wealth funds.
Underscoring the “need to update the rules of the road” so businesses and economies compete on a level playing field, Clinton warned that free economies face an mounting challenge from “‘state capitalism,’’ which she defined as ‘‘the rise of sovereign wealth and the growing presence and influence of state-owned and state-controlled enterprises that operate globally.’’
