LOS CABOS, Mexico Mexico and the United States signed an agreement on Monday to help U.S. firms and Mexican oil monopoly Pemex exploit deep water oil resources in the Gulf of Mexico that straddle the countries' maritime boundaries.
The deal, negotiated last year, will lift the moratorium on oil and gas exploration and production for 1.5 million acres in the Gulf and sets up legal guidelines for companies to jointly develop any trans-boundary reservoirs.
"These reservoirs could hold considerable reserves ... but they don't necessarily stop neatly at our maritime boundary. This could lead to disputes," U.S. Secretary of State Hillary Clinton said at a ministerial meeting of Group of 20 nations in Los Cabos Mexico. "The agreement we are signing today will help prevent such disputes."
Both the U.S. Senate and its Mexican counterpart have to approve the agreement before it goes into effect.
Interior Secretary Ken Salazar called the region an "area of high interest" to oil companies.
"I think there is a very good chance ... the trans-boundary area will be developed in the short term," he told reporters from a call in Washington.
Mexico - the world's No. 7 oil producer - is far behind the United States in exploring for deep water oil reserves and has drilled less than 20 wells in its territorial waters in the Gulf. Pemex estimates there are more than 29 billion barrels of crude equivalent in the area, or 58 percent of the country's prospective resources.
Carlos Morales, Pemex's director of exploration and production, told Reuters in an interview on Monday that the company plans to drill six or seven new deep water wells this year and plans eight new wells annually over the next five years.
So far most of the discoveries in Mexico's deep waters have been natural gas.
DANGERS IN DEEP WATER
Mexico's oil industry regulator worries Pemex does not have the capability or the safeguards in place to move into ultra-deep drilling.
One of the wells Pemex plans to drill this year will be at depths of nearly 10,000 feet, more than 3,000 feet deeper than it had gone before.
Safety concerns loom large after the explosion on BP's Deepwater Horizon rig in April 2010 that killed 11 workers and spewed more than 4 million barrels of oil into the Gulf.
The U.S.-Mexico agreement covers oil spill and safety rules, an U.S. Interior Department official said.
Mexico is hoping to attract help from private companies to explore for oil in the region with a 2008 oil reform that allows for incentive based operating contracts, but no projects have yet been announced
"This agreement also creates new opportunities for our businesses. American energy companies will be able - for the first time - to collaborate with Pemex, their Mexican counterpart," said Clinton.
Mexico, which relies on oil revenues to fund a third of the federal budget, closely guards its oil resources nationalized since 1938.
"This agreement was negotiated invariably under the principle of respecting sovereign rights. Mexican oil wealth is and will continue to be of the Mexicans," President Felipe Calderon said at the event.
Pemex - a major oil exporter to the United States - saw oil output decline dramatically at its largest, aging fields but has managed to stabilize production at around 2.55 million barrels per day (bpd).
The state-oil company has been slow to replace lost reserves with new discoveries.
Last August, however, Pemex announced the discovery of a new light crude oil deposit in the Gulf of Mexico offshore from the southern Mexican state of Campeche.
The Kinbe-1 find has 150 million barrels of proven, probable and possible (3P) reserves, part of the Tsimin and Xux fields that hold a total of 2 billion barrels of crude, Pemex's Morales said.
"We are talking about a giant oil field," Morales said. "These areas will start producing in 2014."
(Additional reporting by Mica Rosenberg and Adriana Barrera in Mexico City and Charles Abbott in Washington; Writing by Mica Rosenberg)