Shannon K. O'Neil

Latin America's Moment

O'Neil analyzes developments in Latin America and U.S. relations in the region.

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U.S. Passes the Transboundary Hydrocarbon Agreement with Mexico

by Shannon K. O'Neil
December 20, 2013

The "Lolair" drilling platform from state oil monopoly Petroleos Mexicanos (PEMEX) is seen off the port of Veracruz, Mexico June 7, 2012 (Stringer/Courtesy Reuters). The "Lolair" drilling platform from state oil monopoly Petroleos Mexicanos (PEMEX) is seen off the port of Veracruz, Mexico June 7, 2012 (Stringer/Courtesy Reuters).

Tacked onto the bipartisan budget, the U.S. Congress passed the long-awaited Transboundary Hydrocarbon Agreement with Mexico. Signed in 2012 by then Secretary of State Hillary Clinton and Foreign Minister Patricia Espinosa, it lays the groundwork for U.S. and Mexican cooperation across some 1.5 million acres of shared oil and natural gas resources in the Gulf of Mexico. The agreement creates guidelines for determining the scope of the deep-water fields and how companies acting on behalf of each country can work together to access these reserves, and creates mechanisms for dispute resolution and for safety and environmental protection.

The treaty’s ratification comes right on the heels of Mexico’s historic energy reform—which had been another stumbling block to the exploration and production of natural resources in the Gulf, as Pemex lacks the capacity and expertise to exploit deep-water finds. Though the secondary legislation is still to be defined, the combination of these two changes opens up the real possibility of exploration and production in the foreseeable future.

Still, the Transboundary Hydrocarbon Agreement isn’t a game-changer for U.S. oil production—given the enormous investments necessary for deep-water exploration and development and the fact that opening these proven and possible reserves adds less than a percentage point to total U.S. reserves. What the agreement does represent, however, is a step forward in bilateral relations, showing that the two North American neighbors can work together on what has long been a politically sensitive topic.

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