Photo credit: Refinery Days by Anthony Lavado

In December 2013, the U.S. Congress passed the Transboundary Hydrocarbon Agreement with Mexico. The agreement was signed a year earlier by former Secretary of State Hillary Clinton and Foreign Minister Patricia Espinosa to lay down the details of a U.S.-Mexican cooperation to mine and utilise oil and gas resources in over 1.5 million acres in the Gulf of Mexico.

Several entities applauded the Congress’ decision, including the White House and the American Petroleum Institute (API). National Security Council representative Caitlin Hayden released a statement saying, “This agreement will establish an environmentally safe and responsible framework to explore, develop and share revenue from hydrocarbon resources that lie in waters beyond each country’s exclusive, economic zones.”

As for the API, the director of upstream and industry operations Erik Milito said, “The energy production made possible by this agreement will put Americans to work and raise more revenue for the government. American companies will now have the certainty they need to invest confidently along our maritime border with Mexico.”

Approving the Transboundary Hydrocarbon Agreement couldn’t have come at a better time. Mexico’s historic energy reform has opened the country’s energy sector to private and foreign investor for the first time in over seven decades. The reform also detailed different types of possible contracts, created the Mexican Petroleum Fund to manage the country’s oil revenues, and removed PEMEX’s union members in an effort to reduce their power.

In addition to boosting the economies of both countries and opening a large number of jobs in the Gulf of Mexico, the agreement will benefit Mexico by providing it with better resources and skilled labor to profit from unused and undiscovered oil and natural gas reserves. While PEMEX had kept Mexico’s name in the list of international oil suppliers, its production rate remained low due to reasons like lack of technology.

As for the U.S., the country’s maritime industry will thrive as shipyards will be commissioned to build vessels to service exploration rigs. Max Paxton, president of the Shipbuilders Council of America, believes that the agreement will increase the number of offshore platforms (estimated at 4,000) by 25%, making it necessary to create “substantially bigger and more complex offshore supply vessels.”

The Sierra Club, however, doesn’t share the same enthusiasm. The environmental organisation believes that the agreement will affect the ecosystem in the Gulf of Mexico region. “As it permits more drilling — via the Transboundary Hydrocarbon Agreement between the U.S. and Mexico — that threatens our coasts and our oceans and feeds our reliance on dirty fossil fuels,” said Athan Manuel, director of the Lands Protection Program at the Sierra Club. “The only silver lining to that provision is that the energy industry’s attempt to gut critical disclosure requirements has been stopped in its tracks”

While the new oil agreement adds less than a percentage point to the U.S. reserves, it is more symbolic in nature since it strengthens bilateral relations and shows how two North American neighbours can handle what was deemed a politically sensitive topic.

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