Cuba irks US with plans for oil drilling

Cuba irks U.S. with plans for oil drilling
By Michael Janofsky The New York Times
TUESDAY, MAY 9, 2006

WASHINGTON In 1977, the United States and Cuba signed a treaty that
evenly divided the Florida Strait to preserve each country's economic
rights. They included access to vast underwater oil and gas fields on
both sides of the line.

Now, with energy costs soaring, plans are under way to drill this year,
but all on the Cuban side.

With only modest energy needs and no ability of its own to drill, Cuba
has negotiated lease agreements with China and other energy-hungry
countries to extract resources for themselves and for Cuba.

Cuba's drilling plans have been in place for several years, but now that
China, India and others are involved and fuel prices are unusually high,
a growing number of lawmakers and business leaders in the United States
are starting to complain.

They argue that the decades-old U.S. ban on drilling in coastal waters
is driving up domestic energy costs and, in this case, is giving two
chief economic competitors to the United States access to energy at its
expense.

"This is the irony of ironies," Charles Drevna, executive vice president
of the National Petrochemical and Refiners Association, said of Cuba's
collaborations with China and India.

"We have chosen to lock up our resources and stand by to be spectators
while these two come in and benefit from things right in our own
backyard," Drevna said.

The U.S. Geological Survey estimates that the energy field on Cuba's
side alone may have 4.6 billion barrels of oil and 9.8 trillion cubic
feet of natural gas. That much energy is equivalent to just a few months
of the United States' total energy consumption.

The survey does not say how much of an energy reserve is on the United
States' side of the Florida Strait just north of Cuba. But almost all of
the country's Outer Continental Shelf, waters within 200 miles, or 320
kilometers, of shorelines, has been off-limits to drilling since the
early 1980s because of congressional bans and executive orders.

President George W. Bush, who renewed the 1977 treaty last December for
two years, has cited China's growing demand for oil and international
efforts to obtain it as prime reasons for high gasoline prices.

The latest version of the administration's national security strategy,
issued in March, warned that China's leaders were "acting as if they can
somehow 'lock up' energy supplies around the world."

To Drevna and others who are lobbying Congress to end the prohibitions,
energy exploration in coastal waters represents a strong step toward
energy independence and lower prices.

The Interior Department estimates that the Outer Continental Shelf has
more than 115 billion barrels of oil and 633 trillion cubic feet of
natural gas available for extraction. At current levels of consumption,
that would satisfy U.S. oil needs for about 16 years and its natural gas
needs for about 25 years.

Opponents of drilling in U.S. waters are equally passionate in their
arguments, saying that drilling for oil off the coast poses
environmental risks and that drilling for finite supplies undermines
long-term conservation solutions.

They also say that modest supplies of additional oil would not
necessarily lower gasoline prices in the United States because oil is
traded on the world market.

But drilling proponents say the time has come to end the bans,
especially with plans by China and India to capture oil and gas so close
to the U.S. shoreline.

"My fear is for the future of America," said Representative John
Peterson, Republican of Pennsylvania, who has more than 160 co-sponsors
for a bipartisan bill that would open coastal waters for natural gas
development. "We have a natural gas crisis, and it's the biggest threat
we have to the American economy."

Senator Larry Craig, Republican of Idaho, took narrow aim at the
activities planned for the Florida Strait and recently complained on the
Senate floor, "Red China should not be left to drill for oil within
spitting distance of our shores without competition from U.S. industries."

Cuba has divided its side of the Florida Strait into 59 lease areas. As
of the end of February, foreign countries had secured the rights or were
negotiating the rights to 16 of them, according to Cuban government
documents provided by the Cuban Interests Section in Washington.

Kirby Jones, founder of the U.S. Cuba Trade Association, a group that
promotes U.S. business interests in Cuba, said Cuba had signed
agreements with companies from China, India, Spain and Canada.

At a recent trade conference in Mexico City arranged by Jones, Cuban
officials invited U.S. oil companies to bid for the other leases on the
Cuban side of the Florida Strait even though drilling in Cuban waters
would violate the U.S. trade embargo against Cuba.

"The main purpose," Jones said, "was to let the American oil executives
know what is happening in Cuba."

U.S. oil companies would have a right to bid for Cuban leases under
legislation Craig is drafting. Dan Whiting, his spokesman, said the
measure would seek an exemption like the one created several years ago
for U.S. companies to sell food and medicine to Cuba.

But an exemption for drilling seems uncertain, given the large number of
lawmakers opposed to any economic relationship with Cuba as long as
Fidel Castro is president.

Craig's measure would be one of several Senate bills aimed at drilling
in waters off U.S. coastlines. Two pending measures would approve
operations in a small tract of the Gulf of Mexico, one of the few
coastal areas where the government allows drilling. A separate measure
introduced two weeks ago by Senator Bill Nelson, Democrat of Florida,
who opposes drilling within 150 miles of Florida's coastline, would
block renewal of the 1977 treaty and then deny foreign companies access
to U.S. markets if they continued to drill in waters close to Cuba.

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