The U.S. oil and gas industry's push into ultradeep waters of the Gulf of Mexico has placed a spotlight on a long territorial dispute between the U.S. and Mexico.
At issue is acreage claimed by both nations in the Alaminos Canyon area of the gulf, near the site where Shell Offshore Inc. and partners are drilling a world water depth record wildcat to test the BAHA prospect (see map, OGJ, Mar. 18, p. 34).
News of the drillsite near Mexican waters brought an outcry from Mexico's conservative opposition party. Mexico's Foreign Ministry then said it will investigate the matter.
As industry's technological capability continues to push into deepwater frontiers, the U.S. government has offered long sought fiscal incentives to support oil and gas production on certain deepwater leases (OGJ, Apr. 1, p. 45).
Those two events point to an issue likely to boil over if significant volumes of oil or gas are found near the disputed territory.
Disputed boundary
The marine boundary between Mexico and the U.S. in the Gulf of Mexico is not legally resolved, leaving regions considered prospective for hydrocarbons in a jurisdictional gray area.
A treaty spelling out a negotiated boundary, signed by both countries in 1978, stalled in the U.S. Senate and today remains unratified under purview of the Senate foreign relations committee.
Although the boundary has been accepted for the most part in practice, two portions of the Central Gulf of Mexico-called "donut holes" by government officials because they fall outside agreed boundaries-were not included in the treaty and remain to be formally divided.
Despite the continuing legal ambiguity, the U.S. Minerals Management Service has offered leases in the northern part of one of the two donut holes for more than a decade. No companies have offered bids for those leases, but Mexican officials and politicians have voiced objections to what they perceive as unilateral U.S. action.
U.S. government officials say action on the boundary is unlikely until companies find hydrocarbons in the region.
Boundary treaty
According to the Law of the Sea Convention, which the U.S. generally respects but has not signed, every country has the right to exploit the natural resources in a 200 nautical mile zone off its coast, called an Exclusive Economic Zone (EEZ).
Because EEZs often overlap between countries, the law requires countries in such instances to draw up marine boundary treaties with their neighbors.
The 1978 U.S.-Mexico treaty drew an equidistant line from the mouth of the Rio Grande River east into the gulf, dividing the areas where Mexican and U.S. EEZs overlapped. A similar line was drawn off the Pacific Coast.
The treaty was quickly ratified in the Mexican Senate, but it was stalled in the U.S. Senate when it came up for review in 1981.
Several senators were swayed by arguments voiced by the late Hollis Hedberg, a Princeton geology professor and industry pioneer. He testified before the foreign relations committee during the treaty debate.
Hedberg maintained maritime boundaries should be negotiated using the edge of the subsea continental shelf as the starting point, and islands should not be taken into account in measuring 200 mile zones. Those methods would leave the U.S. with a significantly larger portion of the Central Gulf of Mexico.
The U.S. State Department disagreed with Hedberg's proposals, saying the treaty was negotiated using internationally agreed methods. The treaty was tabled indefinitely.
The American Association of Petroleum Geologists sent a letter to the foreign relations committee opposing the treaty and supporting Hedberg's views.
AAPG said, "It is the view of the association that in a time of great concern for our energy supplies our country cannot afford to give away areas possibly containing important mineral resources for the sake of expediency in resolving boundary negotiations."
The donut holes
Although the negotiated border has generally been observed by both countries, the treaty did not settle the gulf boundary.
The two donut holes fall in international waters farther than 200 miles offshore and remain to be formally adjudicated.
The eastern donut hole involves Cuba as well as Mexico and the U.S. Because of political tensions between Cuba and the U.S., its boundaries are not likely to be resolved soon.
The western hole, which by all accounts is the more resource prospective of the two, involves only Mexico and the U.S. It is likely to be divided according to Article 76 of the International Law of the Sea, which divides such regions in conformance with the edge of a country's continental shelf, officials from both countries say.
Jumping the gun?
Despite lack of jointly agreed lines dividing the western donut hole, MMS has offered leases there since 1983, not long after the treaty was tabled in the U.S. Senate.
Tom Readinger, MMS offshore program coordinator, said the State Department approved lease sale planning area maps including a portion of the donut hole. Readinger said the line marking the limit of lease blocks is a limit of protraction on the map meant, he said, "to reflect that this is not to be considered the official U.S.-Mexico boundary."
Readinger conceded Mexico could dispute the lease offerings in the donut hole. But he said, "We think we have an international basis for that line."
U.S. Deputy Asst. Sec. for Oceans David A. Colson, who represents the State Department in maritime negotiations with other countries, said the U.S. generally asserts its right to develop what it considers its continental shelf regardless of whether a boundary line has been drawn.
Colson said, "Although no formal boundary has been established, we believe the area in the northern part of the donut hole is U.S. continental shelf, and we would concur in Interior moving forward in its program in that area."
Mexican reactions
Mexican officials, traditionally suspicious of U.S. intentions-particularly regarding oil-have expressed misgivings about lease offerings in the unresolved region, as well as the U.S. failure to ratify the 1978 treaty.
Mexico's National Action Party (PAN) voiced concern the Shell group's BAHA wildcat could tap Mexican oil.
"There is suspicion-and for me almost a certainty-that the fields to be exploited extend below the subsoil of Mexican waters," PAN Sen. Jose Angel Conchello Davila told the Mexican Senate.
"We demand that the Foreign Ministry inform the people of Mexico whether this suspicious drilling isn't aimed at extracting oil under the jurisdiction of the Mexican nation."
The Foreign Ministry responded by saying it would consult with Mexico's Energy Ministry to find out "if the drilling of this exploratory oil well, in the EEZ of the U.S., could have any impact on natural resources on Mexico's continental shelf."
Leonora Rueda, Director General of Mexico-U.S. frontier issues at the Mexican Foreign Relations Secretariat, said, "While no definition on an international level has been agreed regarding the exploitation of natural resources in the region in question, any sort of unilateral action would worry us a great deal."
Rueda said she is unaware of any contact between the U.S. State Department and her office over the U.S. proceeding with lease sales in the disputed area.
She added Mexico hopes the U.S. will agree to joint exploration of the disputed boundary region to determine what potential resources exist. As a basis for this bilateral approach, she cited provisions in the Law of the Sea Convention to share royalties on resources extracted in international waters.
Industry's view
Oil and gas industry executives remain cautious on the boundary issue, clearly not wanting to disturb relations with Mexico at a time when that country's petroleum industry is slowly opening to foreign participation.
One executive involved in Gulf of Mexico drilling said his company is aware the donut holes exist and the treaty has not been ratified.
"We would like to see the boundary between the U.S. and Mexico formalized. Clearly it would solve a lot of problems," he said. "The area is way out there, in superdeep waters, so there are no short term implications, but it's clear something needs to be resolved."
Asked if his company would consider taking leases currently on offer in the donut hole, the executive said, "If it's going to be competitively bid on, I don't know if I would stay out of it. It looks like a clouded title if a foreign government could make a claim on it, but I would look for the federal government to protect me if they put it out for sale."
Although water depths in the donut hole are extremely deep-6,000-13,000 ft-exploratory drilling water depth records continue to fall in the U.S. portion of the gulf. The latest water depth record is due to topple along the maritime boundary and not far from the donut hole when the Shell group spuds a well in the area of Alaminos Canyon Block 809 in 7,625 ft of water to probe the BAHA prospect.
From the industry interest shown in deepwater exploration in the gulf, it likely is just a matter of a few years before companies begin considering production efforts in the boundary region and the jurisdiction issue arises.
With the U.S. government's deepwater royalty relief plan and better than expected results from deepwater wells, economic thresholds for deepwater production are dropping. Industry officials see the economic threshold for producing in 7,000-10,000 ft of water as approachable.
According to Sonat Offshore Drilling, which set the current deepwater drilling record of 7,520 ft in 1987 and expects to break that with Shell's BAHA well, deepwater development drilling will not be long following in those footsteps.
Producing wells in 5,000-7,000 ft of water should be possible "within 5 years," said Sonat Senior Vice Pres. Jon Cole. "People have definitely made the decision to go ahead with development in (such) deep water, based on the interest we've seen from production companies."
Geology
Some basic information is generally known on the geological structures underlying the western donut hole (OGJ, Feb. 26, p. 73).
The northernmost portion, ostensibly under U.S. jurisdiction, is a section of the Sigsbee escarpment, an 800 m slope defining the edge of the U.S. Outer Continental Shelf. Moving south across the donut hole, the slope drops off into the Central Gulf abyssal plain, a flat stretch of seabed.
Water depths range from about 6,000 ft at the high end of the escarpment to 13,000 over the abyssal plain.
A 1981 U.S. Geological Survey assessment of the boundary region, commissioned by the Senate after the treaty was tabled, concluded that although other boundary region formations looked prospective, the Sigsbee escarpment and the portion of the abyssal plain in the donut hole did not look promising.
Recent research has proved more revealing-due mainly to improvements in 3D seismic imaging-and points to salt structures along the escarpment as possible traps for hydrocarbons. The nearby abyssal plain, most of which is likely to fall in Mexican waters, appears bare of such structures.
"The escarpment is underlain by a rather shallow massive section of tabular salt that forms a canopy," said Ray G. Martin, one of the authors of the USGS report and currently a private consultant.
"The salt canopy underlies the entire slope, from Alaminos Canyon to Keathley Canyon on out to Walker's Ridge. It looks like there are some very large geological structures out there that could be highly prospective for oil and gas."
Gary Lore, regional supervisor for resource evaluation in the New Orleans MMS office, said from the interest he's seen from operating companies, it appears industry has confidence in the geology in the deepwater regions of the planning area.
"Just about every field in the shallower waters of the continental shelf has been drilled," Lore said. "So companies are pushing to explore new areas, and the deepwater gulf is the last undrilled frontier in North America."
Copyright 1996 Oil & Gas Journal. All Rights Reserved.
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