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Feature 050613 USDOS hydrocarbons

Monday, May 6, 2013

Fact Sheet: U.S.-Mexico Transboundary Hydrocarbons Agreement

U.S. Department of State

May 2, 2013

In 2012, the United States and Mexico signed an agreement concerning the development of oil and gas reservoirs that cross the international maritime boundary between the two countries in the Gulf of Mexico. The Agreement is designed to enhance energy security in North America and support our shared interest to exercise responsible stewardship of the Gulf of Mexico. It is built on a commitment to the safe, efficient, and equitable development of transboundary reservoirs with the highest degree of safety and environmental standards.

• Mexico is consistently one of the top three exporters of petroleum to the United States.

• The United States is Mexico's largest supplier of refined oil products, mostly coming from U.S. Gulf Coast refineries.

• Former Secretary Clinton and then Mexican Foreign Secretary Espinosa signed the Agreement in Los Cabos in February, 2012. Mexico ratified the agreement in April 2012.

• The Agreement establishes a framework that promotes unitization of maritime transboundary reservoirs. Upon entry into force, the current moratorium on oil exploration and production along the boundary in the Western Gap portion of the Gulf of Mexico will end.

• Mexican law currently prohibits Petroleos Mexicanos (PEMEX) from jointly developing resources with leaseholders on the U.S. side of the boundary. Mexico opened the door to such cooperation in a 2008 energy reform law, but only if the cooperation takes place pursuant to an international agreement governing transboundary reservoirs. The Agreement takes advantage of this opportunity.

• The Agreement facilitates the formation of voluntary arrangements - unitization agreements - between U.S. leaseholders and Pemex for the joint exploration and development of transboundary reservoirs. It also provides appropriate incentives to encourage the formation of such arrangements if a reservoir is proven to be transboundary and a unitization agreement is not formed. Ultimately, the Agreement provides that development may proceed in an equitable manner that protects each nation's interests.

• The Agreement provides for ongoing cooperation between the two governments related to safety and the environment, and also provides for joint inspection teams to ensure compliance with applicable laws and regulations. Both governments will review and approve all unitization agreements governing the exploration and development of transboundary reservoirs under the Agreement, providing for approval of all safety and environmental measures.

• Both the U.S. House of Representatives and the Senate have introduced bills that would approve the Transboundary Agreement and give the Secretary of the Interior the necessary authorization to implement the agreement. The Administration looks forward to speedy passage of the authorizing legislation.

Effect of the Agreement

• The Agreement will enable U.S. companies to explore new business opportunities and carry out collaborative projects with the Mexican national oil company PEMEX.

• It is expected the Agreement will unlock areas for exploration and exploitation along the boundary within U.S. jurisdiction by providing the legal certainty companies need to invest, potentially providing increased revenues and energy security benefits that would result from increases in production.

• This agreement will make nearly 1.5 million acres of the Outer Continental Shelf more attractive to U.S. operators. The Department of the Interior's Bureau of Ocean Energy Management (BOEM) estimates that this area contains as much as 172 million barrels of oil and 304 billion cubic feet of natural gas.

• The Transboundary Agreement will also help mitigate the safety and environmental risks that would result from unilateral exploration and exploitation along the boundary.

U.S. State Department, Washington, D.C., May, 2, 2013

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