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Oil, water a tense mix

Unskilled at deep-sea drilling and crowded by foreign firms, Mexico may open its industry to partners

June 05, 2008|Marla Dickerson | Times Staff Writer

U.S. GULF OF MEXICO — Eight miles north of the maritime border with Mexico, in waters a mile and a half deep, Shell Oil Co. is constructing the most ambitious offshore oil platform ever attempted in the Gulf of Mexico.

As tall as the Eiffel Tower, the floating production facility will be anchored to the ocean floor by moorings spanning an area the size of downtown Houston. Slated to begin operating late next year, this leviathan known as Perdido (or Lost) will cost billions and be capable of pumping 100,000 barrels of crude a day.

But Perdido's most-notable achievement may be to compel Mexico to loosen its 70-year government monopoly on the petroleum sector, thanks to a phenomenon Mexicans have dubbed the "drinking straw effect."

Mexicans fear that companies drilling in U.S. waters close to the border will suck Mexican crude into their wells. Actor Daniel Day-Lewis' fictional oilman in "There Will Be Blood" likened the concept to siphoning a rival's milkshake.

"When they take petroleum from the American side, our petroleum is going to migrate," Sen. Francisco Labastida Ochoa, head of the Mexican Senate's Energy Committee, told the newspaper Milenio recently.

Oil isn't a simple commodity in Mexico. It's a powerful symbol of national sovereignty. Rancor over foreigners profiting from its hydrocarbons -- namely America's Standard Oil -- led Mexico to nationalize its industry in 1938. The state-owned oil company Pemex is forbidden by law from partnering with outsiders to exploit a drop of Mexican crude.

But for a growing chorus of Mexicans, sharing a milkshake is preferable to watching your neighbor drink it up. Mexico has no viable deepwater drilling program to match U.S. efforts near the maritime border. And it lacks an iron-clad legal means to defend its patrimony. Some are urging their government to partner with the U.S. to co-develop border fields or risk losing those deposits.

Mexican Energy Secretary Georgina Kessel has spoken repeatedly of her desire to negotiate such a pact. Cross-border fields are a hot topic in Mexico's Congress. Lawmakers are embroiled in a heated debate on how to strengthen Pemex, which provides 40% of Mexico's tax revenue but whose slumping output is alarming the nation.

Proposed legislation would still ban partnerships. But the consensus to permit some exception in the gulf region is growing as oil companies move closer to Mexican territory. The U.S. has issued drilling rights on dozens of parcels less than 10 miles from Mexican waters. Shell, BP, Chevron and Exxon Mobil, plus independents including Houston's Bois d'Arc Energy, have secured acreage adjacent to the boundary.

"The pressure is forcing [legislators] to do something," said Mexico City attorney David Enriquez, a maritime law expert who will testify at a Senate hearing today on transborder reservoirs. "It's the one area where they are unified."

It's unclear whether big shared deposits even exist in the Gulf of Mexico. Historically, the region's deepwater finds have been isolated pockets of petroleum, not mega-fields.

Officials at the U.S. Minerals Management Service, the federal agency that regulates U.S. offshore production, said they had no knowledge that any gulf reservoirs now under development crossed the international divide.

Shell, which is developing its Perdido platform with Chevron and BP, said the deposits they were targeting were confined to U.S. territory.

Mexicans are skeptical. A recent editorial cartoon showed a greedy Uncle Sam sucking from a straw plunged deep into the gulf. But Pemex hasn't done the seismic and drilling work needed to determine if there is crude on its side.

All the more reason, Enriquez said, for Mexico to collaborate with the U.S. to find out what lies near the 470-nautical-mile gulf border and end all the speculation.

A spokesman for Minerals Management said his agency had worked with Mexico before on boundary issues and was open to discussing cross-border fields. "It's the neighborly thing to do," said Dave Cooke, deputy regional supervisor for resource evaluation for the agency in New Orleans.

Oil and gas fields straddle international borders all over the globe. Countries typically strike a "unitization agreement" to share the costs to extract the deposits and split the proceeds based on how much lies in each nation.

Britain has partnered with the Netherlands and Norway in the crowded North Sea. Australia and East Timor have a unitization agreement. So do Nigeria and Equatorial Guinea.

But the U.S. and Mexico have long skirted the topic, given their prickly history with oil.

Until recently, such an agreement wasn't necessary. Both nations had plenty of shallow-water reserves to keep them occupied. Low oil prices didn't justify the exorbitant costs of deepwater drilling, where a single well can cost $100 million or more.

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