Towards a cross-border unitization agreement between Mexico & USA for the exploitation of the common oil reserves in the Gulf of Mexico

THESIS RESUME For the Mexican people the petroleum is not just a hydrocarbon, but part of their national identity. It is a kind of patriotic symbol and a main part of their sovereignty. This is reflected in their Constitution in Article 27, fourth paragraph, which states that the nation has direct ownership for all minerals or substances found in veins, strata and other forms of deposits. The ownership by the nation is inalienable and imprescriptible. Furthermore only the State, through its oil company, can carry out the different activities for the exploitation of hydrocarbons. Thus, in order to be able to make a cross-border unitization agreement for the common fields with USA, on a country level, is necessary to first amend Constitutional Article 27 and its Regulatory Law to be able to make a field unitization on a license level. Especially since Mexico faces the American Rule of Capture. The moratorium of 10 years for the commercial exploitation of the common deposits, established in the Doughnut Hole Treaty , signed by both countries, ends on January 16th 2011, which means in less than three years. Mexico has done nothing to explore the area and to prepare its oil company (PEMEX) with the technology and the legal framework to start the commercial exploitation of the common reserves. This problem must be solved before it becomes a critical political issue in the bilateral relations of the states or even explodes into a full scale dispute. Solutions then usually become even more difficult to reach as the situation becomes burdened with exacerbated nationalistic attitudes. An attempt to reach a diplomatic agreement for the unitization of the transboundary reserves and the joint operation of the fields seems to be a much better approach. This thesis is planned as a proposal for the solution of the potential conflict. It analyzes different unitization systems adopted internationally and explores how the countries can benefit from each other s experience. It is necessary to state that I will not deal with unitization agreements between licensees because of the complexity and extent of the topic, which deserves a separate study and is beyond the scope of this thesis. For the same reason, the study will not deal with technical issues, such as the structure of allocation formulas for the determination and redetermination of reserves, as well as apportionment of deposits, despite the fact that information about this was found. Neither does the thesis study maritime delimitation boundary agreements, but some are briefly commented in different cases because this is an issue that needs to be addressed in order to make a unitization agreement of transboundary oil fields.