Tuesday, July 6, 2010

Drilling off Cuba could be sticky proposition

By Christine Stapleton

The Seattle Times (Cox Newspapers)

WEST PALM BEACH, Fla. — Despite the warnings of Dick Cheney, George Will, Rush Limbaugh and Fox News, the Russians are not drilling for oil off Cuba. Neither are the Chinese. In fact, no one — not even Cuba — is drilling for oil off Cuba. The pesky and persistent rumor, bubbling back up with the Deepwater Horizon disaster, is still nothing more than a pesky and persistent rumor — aired in 2008 by former Vice President Cheney (who got the misinformation from conservative columnist Will), repeated on Fox News and recently revived by conservative radio commentator Limbaugh, who told his listeners 10 days after the spill: "The Russians are drilling in a deal with the Cubans in the Gulf. The Vietnamese and Angola are drilling for oil in the Gulf in deals with the Cubans. "However, as oil from BP's exploded well continues surging from the Gulf floor and washing onto Panhandle beaches, the rumor is poised to become fact. Repsol, a Spanish company, expects to begin drilling off Cuba in 2011, according to published reports and oil-industry analysts. Companies from at least 10 other countries, including Russia and China, are negotiating or already have signed lease deals to drill off Cuba. Should the United States be concerned about drilling off Cuba? Yes, according to Jorge Piñon, former president of Amoco Oil Latin America and now a visiting research fellow with the Cuban Research Institute at Florida International University. "Let's face it, the oil industry is a risky enterprise and there is always concern for a Deepwater Horizon incident," Piñon said. But he added: "If we are going to be afraid of drilling off Cuba, we need to be afraid of the 3,500 rigs drilling in the Gulf of Mexico. "How much oil lies beneath Cuban waters is unknown. Only one exploration well has been dug and hydrocarbons were detected. A U.S. Geological Association survey indicated there are significant reserves. The troubling question for companies hoping to drill is what to do with the oil after they get it out of the ground. Cuba has limited ability to refine oil. The embargo bans U.S. companies from refining Cuba's oil, and two other large refineries in the Caribbean are owned by U.S. companies: Hess in St. Croix, Virgin Islands, and Valero in Aruba. Venezuela's refineries are "maxed out," Piñon said. "Oil has zero value unless you can turn it into gasoline or diesel," Piñon said. "Where are they going to refine it?"

Politics could force an answer to that question. Lifting the embargo and allowing U.S. companies to profit from refining Cuban oil is one option. Another is to continue the embargo and risk Cuba strengthening its friendships with U.S. foes. A refinery on Cuba's northern coast is being built by a partnership between Venezuela and Cuba. "People say they (Cuba) can't or shouldn't do it (drill for oil). Well, forget it," Jones said. "It is going to happen, and you guys in Florida can't stop it, and the U.S. government can't stop it, but you'd better think of a way to deal with it." Zones established by maritime law in 1977 gave the United States and Cuba special rights of exploration and navigation in the Florida Straits.

The boundary of Cuba's Exclusive Economic Zone extends to within 45 miles of Key West. The parcels within the zone that Cuba has leased for drilling are along Cuba's northwest coast — about 65 miles south of Key West. By comparison, the Deepwater Horizon well, as much of a concern as it is to South Florida officials, is 800 miles away. Oil from a spill off Cuba could much more quickly enter the Florida Straits and blanket the Keys and South Florida as it is pulled north on the Gulf Stream. "It's ironic that we have been worried about them drilling when it is us that we had to worry about," said Kirby Jones, president of Alamar Associates, a consulting firm specializing in trade with Cuba. The Deepwater Horizon disaster has forced politicians, policy makers and petroleum companies to rethink how an oil spill off Cuba would play out, Jones said.

Politics, geography and long-standing grudges would make responding to a spill from Cuba much more complex. The 48-year-old Cold War era embargo against Cuba would bar U.S. companies from providing equipment, technology, advice, vessels or personnel to stop and clean a spill off Cuba. "Today, if Mexico or the Bahamas or Canada have a spill, all they have to do is call Houston and in a matter of hours they have access to submarines, skimmers and blowout preventers," Piñon said. "With Cuba, that is not the case. "Wayne Smith, a former chief of the U.S. Interests Section in Havana — the equivalent of ambassador — recently traveled to Cuba with a group of lawmakers from Texas to discuss hurricane preparedness. Conversations quickly turned to the oil spill. With oil from U.S. waters heading toward Cuba and Cuba poised to begin offshore drilling, now would be a good time for the United States to rethink its relations with Cuba and the embargo, Smith said. "Certainly you could make arrangements and exceptions to the embargo," Smith said. "Cuba seems to have the same effect on American administrations as the moon used to have on werewolves."

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