Cuba oil prospects cloud US horizon

Cuba oil prospects cloud US horizon
By Laura Smith-Spark
BBC News

The discovery of potential deep-water oil and gas reserves off Cuba's
northern coast has caught the eye of the world's energy-hungry nations.

India's state-run oil firm ONGC, already signed up to exploration in the
area, has just upped its stake - the latest to place its bets on a Cuban
oil rush.

The 44-year-old US trade embargo, meanwhile, continues to bar American
companies from doing business with the Caribbean island.

But, some observers are asking, can the US really afford to risk losing
out on valuable energy resources only 50 miles (80km) off Key West?

The prospect of nations such as China, Venezuela or India lining up to
exploit Cuban oil has already led some politicians to call for the
embargo to be relaxed.

They want US oil companies to be able to bid for exploration rights -
and for environmental laws to be relaxed to allow drilling in the
adjoining US waters.

Others insist the embargo must remain in force in order to keep pressure
on Cuba's President Fidel Castro over human rights.

Gulf promise

Cuba's share of the Gulf of Mexico was established in 1977, when it
signed treaties with the US and Mexico.

A US Geological Survey report published last year estimates that 4.6
billion barrels of oil and 9.8 trillion cubic feet of natural gas could
lie within that zone, in the North Cuba Basin.

By comparison, oil deposits in Alaska's Arctic National Wildlife Refuge
- where a Republican-led push to allow drilling was narrowly defeated
last year - are estimated at 10 billion barrels.

Cuba had already parcelled its 112,000 sq km (43,240 sq mile) territory
into 59 exploration blocks, which it opened up to foreign companies in 1999.

Initial test drilling results and rising oil prices have combined to
make the potential deep-water reserves a promising prospect.

Six foreign companies have signed up for 16 of the blocks, according to
Fidel Rivero, director general of Cuba's state oil company, CUPET.

Canadian firm Sherritt has taken the rights for four blocks and is
already involved in on-shore oil production in Cuba, off Varadero - as
is China.

It gives an indication that the geology of the area must be extremely
positive
Jorge Pinon, energy consultant

India's ONGC announced its investment in two blocks on Sunday, saying it
presented the opportunity of "great finds".

In May this year it agreed a 30% stake in a separate six-block venture
with Spanish firm Repsol YPF. A further 30% share was taken by Norway's
Norsk Hydro.

Jorge Pinon, an energy consultant working for the Institute for Cuban
and Cuban-American Studies at the University of Miami, said the
involvement of Norsk Hydro - a leading offshore oil producer - was
significant.

"It gives an indication that the geology of the area must be extremely
positive and has a high possibility of producing oil in commercial
quantities," he told the BBC News website.

However, even if good quality reserves are found, he believes it will be
at least five years before production really gets going because
deep-water rigs are in short supply.

Rival legislation

The debate over Cuba's potential oil reserves has been making waves in
Congress.

Our current policy doesn't serve our energy needs, environmental
concerns, or economic principles
Congressman Jeff Flake

This summer, Republicans Jeff Flake and Larry Craig introduced twin
bills to the House of Representatives and Senate respectively that would
exempt American "big oil" from the embargo.

Congressman Flake, who represents Arizona, described the ban on trade
with Cuba as "archaic policy".

"Our current policy doesn't serve our energy needs, environmental
concerns, or economic principles," he said.

Two Florida Democrats, Senator Bill Nelson and Congressman Jim Davis,
countered with rival legislation which would deny US visas to the
executives of foreign oil firms which drill in Cuban waters.

They warn of the potential environmental threat, should deep-water
drilling lead to oil spills.

"At risk are the Florida Keys and the state's tourism economy, not to
mention the $8bn that Congress is investing to restore the Everglades,"
said Sen Nelson.

Future thaw?

Meanwhile voices from the Cuban-American lobby argue that loosening the
embargo would weaken the US government's ability to pressure Cuba on
human rights.

The Cuban American National Foundation, an anti-Castro exile group based
in Miami, has called instead for trade restrictions to be tightened further.

Speculation over a possible future thaw in US-Cuba relations has been
heightened by Fidel Castro's recent illness and temporary delegation of
power to his brother, Raul.

While few people believe Cuba's oil prospects augur an immediate end to
the decades-long embargo, some believe it is a step in that direction.

One of those is Kirby Jones, president of the US-Cuba Trade Association,
an organisation which seeks to normalise trade relations between the two
nations.

"It's really the 800lb gorilla waiting to knock on the door," he told
the BBC News website.

"As soon as Cuba actually once again initiates exploration - as soon as
there's an oil platform scheduled to be in their waters - I think we
will see a lot more interest and US companies very active.

"It's really the first time ever in the history between the US and Cuba
that there is a strategic cost to maintaining the embargo.

"[Cuba's oil] will be explored, there's no question about that - it's
whether the US will share it, or maintain the embargo and let it go to
China, India, Norway."

What we are seeing now is a certain level of interest - but not
necessarily something that's really going to up-end the Cuban embargo
Daniel Erikson
Inter-American Dialogue

Daniel Erikson, Caribbean programmes director at the Inter-American
Dialogue, a Washington policy group, points out that Cuba has said US
firms would be welcome to explore its waters.

"It's being watched with a fair amount of interest by oil and gas
companies in Texas and elsewhere," he said.

However, he also sounds a note of caution. Few firms have the technology
to drill deep enough to reach Cuba's potential oil reserves - and, if
proven, their depth would make them costly to exploit.

"Companies aren't going to push for any change to US law unless they
really know that Cuba has substantial reserves," he said.

"So what we are seeing now is a certain level of interest - but not
necessarily something that's really going to up-end the Cuban embargo."
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/hi/world/americas/5321594.stm

Published: 2006/09/11 15:55:02 GMT