Forum urges US and Mexico to resolve gulf boundary
dispute
by Nick Snow
24-04-08
The US and Mexico are becoming more aware of the potential for disputes
over deepwater Gulf of Mexico oil resources, experts agreed at an Apr. 23
forum at the Woodrow Wilson International Centre for Scholars in Washington,
DC. But some of the participants suggested that discussions between the two
countries could be severely limited unless Mexico finds a way to make the
transboundary resource question a binding international matter separate from
oil's place in the national constitution.
"International law is the only vehicle that can effectively deal with this
issue," said David Enriquez, a partner in the Goodrich, Riquelme, and
Associates law firm in Mexico City. He suggested that the United Nations Law
of the Sea could provide a basis for a Mexican-US transboundary oil
resources agreement and said the countries should form bilateral working
groups soon.
But Miriam Grunstein, an associate in the Thompson & Knight law firm's
Mexico City office, said the transboundary oil resource question may ignite
a drive for broader energy reforms, which could take years to achieve.
"It not only would be crossing national boundaries but also boundaries
involving industry practices," she maintained.
Lourdes Melgar, an independent energy consultant who served in various
diplomatic positions in Mexico's foreign affairs ministry during 1993-07,
said the two countries agreed to a boundary in the Gulf under a 2000 treaty,
which included a 1.25-mile leasing buffer on each side.
"Mexico needs to act"
No discussions have been held since, and there could be a rush to lease
tracts on the US side when the agreement expires on Jan. 1, 2011, because of
significantly higher crude oil prices and improved deepwater exploration and
production technology, she continued.
"There very likely are significant fields in the Perdido Belt between the
Western Gap and the coast. Mexico urgently needs to act or it will lose its
share of these resources," Melgar said.
But a US Minerals Management Service official said that exploration activity
near the boundary has been modest in the 10 years that the Department of
Interior agency has been issuing leases.
"It's still largely a wildcat area at its initial stage of geologic
evaluation. Only one development is proceeding, about 10 miles from the
boundary which is far enough to not raise drainage questions, and it would
not produce before 2010," said Chris Oynes, associate director of the
offshore minerals management program at MMS.
"Currently, the US government does not have a mechanism to acquire data from
Mexico to enhance our understanding of the region. There are indications
that the faulting is complex, which mitigates the risk of the resources
migrating. The question could arise with leases closer to the boundary," he
added.
"Time is running out," declared Joseph M. Dukert, an independent energy
consultant who is president-elect of the US Association for Energy
Economics. "When producers talk about drilling wells in water 2 miles deep
and not stopping until they've gone 5 miles down, sometimes through a layer
of salt, they're not talking about producing conventional oil."
He noted that Mexico's national oil company, Petroleos Mexicanos, has not
had the financial resources to develop deepwater drilling expertise and
consequently is unprepared to produce much of Mexico's remaining oil
resources.
Dukert said that he does not expect Pemex to be privatized but added that
the boundary agreement of 2000 has set the stage for bilateral cooperation
which could be extended to the transboundary resource question.
"Constitution doomed us to isolation"
Other participants questioned whether the issue can be addressed without
major reforms at Pemex that could require a constitutional amendment.
"In my view, constitutional change would be preferable. Our constitution has
pretty much doomed us to isolation," said Grunstein, who noted that in the 5
years since Vicente Fox became Mexico's president, there have been 500
constitutional trials. Felipe Calderon succeeded Fox on Dec. 1, 2006.
Grunstein said that energy reform proposals currently before Mexico's
congress are "a sliver of a solution" because they simply give Pemex
authority to negotiate transboundary agreements without requiring it to
provide contract arrangements to attract the necessary foreign partners to
evaluate, explore, and develop deepwater oil resources. The bill
acknowledges that the transboundary question exists but provides no legal
framework to reach and implement agreements, she said.
Melgar conceded that the bill actually is a very limited oil sector reform
proposal but added that the national constitution said that international
law can apply when transboundary questions arise.
"That could form the basis for talks and agreements," she said.
Foreign companies see it as a very timid effort, Grunstein responded.
"They think it's interesting that the government is starting to discuss this
question. But they still want to be able to book reserves if they help
develop the resources," she said. The problem extends to refining because
building and operating a plant for Pemex without having title to the
property and equipment, to the feedstock, or to the products is not
appealing, she added.
"There is a political consensus that the transboundary reservoir issue needs
to be addressed," Enriquez said. But he also expects that it will be
necessary for the courts to rule on any reforms that pass Mexico's congress
and become law to provide a possible legal basis for contracts.
Grunstein said that this would pose a risk.
"If the [Mexican] Supreme Court does not rule in favour of the reforms,
we're toast. We'll be confronting not only the constitution but also a
judicial opinion which would be setting a legal precedent," she warned.
Source: www.ogj.com
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