By Tom Fowler
2/21/2012
Courtesy The Wall Street Journal
The U.S. and Mexico have reached an agreement that would allow oil and gas drilling on more than 1.5 million acres in the Gulf of Mexico, resolving a dispute that has left those areas in limbo for more than a decade.
The agreement signed Monday by U.S. Secretary of State Hillary Clinton and Mexican Foreign Minister Patricia Espinosa in Los Cabos, Mexico, establishes a legal framework for U.S. companies to develop offshore energy projects with Petroleos Mexicanos, the Mexican state oil company known as Pemex, in areas that straddle the two nations' maritime border. The acreage runs due east from the U.S.-Mexico border to a point more than 200 miles south of the mouth of the Mississippi River, and includes areas where the water is almost 11,000 feet deep.
The agreement also allows U.S. and Mexican safety officials to work together to ensure the projects meet the safety standards of both nations and sets the groundwork for more cooperation to develop uniform safety guidelines for offshore energy development.
The safety agreement is particularly important as Pemex prepares to drill a site near the U.S. maritime border in 9,000 feet of water, nearly twice as deep as the well drilled by the doomed Deepwater Horizon rig in 2010. Officials on both sides of the border have expressed concerns about Pemex's ability to safely handle such a complex project since it has done relatively few deep-water projects compared with operators in U.S. waters and none as deep as 9,000 feet.
"We're moving forward with Mexico to make sure we have a common set of safety protocols," U.S. Secretary of the Interior Ken Salazar said in a conference call.
Mexico, the U.S.'s No. 2 oil supplier behind Canada, has seen its offshore oil production drop for seven straight years and has only about 10 years of proven reserves of crude. The deep-water project is seen as an attempt to reverse that trend.
Houston-based Helix Energy Solutions Group Inc. has discussed providing a system to Pemex to contain a subsea oil leak like the one that occurred following the April 2010 Deepwater Horizon accident off Louisiana, but no firm agreement has yet been reached, according to a spokesman for Helix.
The areas that are part of the agreement may contain as much as 172 million barrels of oil and 304 billion cubic feet of natural gas, according to the U.S. Bureau of Ocean Energy Management.
The bureau included some of the acreage in a lease sale in December, with the understanding nothing would be finalized until the dispute was settled. The area is near successful projects such as Royal Dutch Shell PLC's Perdido production platform, which is producing about 90,000 barrels of oil equivalent per day.