Crossing Boundaries: Can a Solution be Found for Transboundary Oil Resources in the Gulf of Mexico?
Mexico and the United States share a large border within the Gulf of Mexico which may be home to significant deep-water oil reserves. Since exploration and drilling on either side of the border could shift existing oil reserves on the other side, the two countries need to negotiate binational treaties that govern how these processes are to take place before proceeding. Nonetheless, the two countries have only negotiated only one treaty that covers a small portion of this transboundary area to date. On April 23, 2008, the Woodrow Wilson Center's Mexico Institute and Energy Initiative, along with the Mexican Energy Network (Red Mexican de Energía) organized a seminar to present the findings of a Mexican working group on transboundary oil reserves. Kent Hughes of the Wilson Center's Program on Science, Technology, and the Global Economy, chaired the session.
Lourdes Melgar, a career diplomat and member of the Mexican Energy Network, opened the discussion by noting that the Mexican constitution does not allow the government to permit exploration of transboundary oil fields, since this requires entering into agreements for extraction with foreign governments. The Mexican government has negotiated a treaty to limit exploration near the U.S.-Mexico border in the Gulf of Mexico, but that covers only a small part of the transboundary region. The Mexican government also has no such treaty with Cuba, which is also beginning exploration in a contract with Petrobras, the Brazilian national oil company, in deep waters near its border with Mexico.
David Enriquez, a partner at Grupo Derecho Marítimo y Energía Costa Afuera and a Network member, argued that Mexico should, at a minimum, establish a joint committee of experts with the U.S. government to evaluate whether current exploration in the Gulf of Mexico, on both sides of the U.S.-Mexico border, might affect reserves on the other side. He also suggested that the two countries set up a working group as a first step in determining how to proceed with future exploration.
Miriam Grunstein, an attorney with Thompson and Knight in Mexico City and a Network member, argued that eventually the two countries might have to reach a unitization agreement, which would allow them to decide how to divide up any oil reserves that might lie on both sides of the border in the Gulf of Mexico. She observed that if reserves were to be found today, it would be likely to spark a nationalist backlash in Mexico, since the country has no legal way of defending its reserves from the effects of exploration and extraction on the other side of the border, as well as no way of exploiting them for the benefit of Mexico.
Chris Oynes, the Associate Director for Offshore Minerals Management at the U.S. Mineral Management Service, noted that there has been little deep-water exploration on the U.S. side of the transboundary region so far because of the risk involved. The U.S. government has granted leases to several private companies for exploration, but only one, Perdido Hub, is actually being explored. Nonetheless, it is far enough away from the border that it is unlikely to raise any transboundary issues. However, he expressed concern that the U.S. government has no mechanism to discuss these issues with the Mexican government. He also described the unitization agreements used by U.S. states to decide on the allocation of oil reserves found near state boundaries. There are roughly 150 of these agreements, and these could serve as a model for the kind of transboundary oil agreements that might be possible with Mexico in the future.
Joe Dukert, an independent energy consultant and commentator for the panel, observed that this discussion is taking place at a time when Mexico continues to be a net exporter of oil but its production is dropping off. Mexico will need to tap its potential reserves in the Gulf of Mexico to regain its previous production levels. This is particularly significant since Pemex contributes 37 to 39 percent of the federal budget. It will be important to determine if deep water reserves do exist and whether they are exploitable. If so, then it raises the question of whether they should be exploited as a unit between the two countries and what unitization protocol could be used for this. He also noted that the U.S. Mineral Management Service cannot do unitization across international borders under current law, so the U.S. government will also have to act for the two countries to work together strategically on this issue.