Drill, Cuba, Drill

Drill, Cuba, Drill

A brand new, top of the line, Italian owned and Chinese-made semisubmersible rig is on its way to Cuba to start drilling several exploratory wells this year once hurricane season is over. Its target are deep waters in the Gulf of Mexico just a few dozen miles from Florida that could hold proven oil reserves believed to be at least as big as Oman’s and perhaps comparable to those of Brazil. The latter are massive.

Cuban drilling should be a US bipartisan no-brainer. Democrats want the embargo softened and Republicans want to give oil companies more access to offshore oil. And all will agree a lot of new production bordering the US would be welcome news, especially if American oil companies are eventually allowed to take a stake and if environmental safeguards against spills are improved in the process.

Yet there is a great deal of noise coming from Congress compounded by some White House acquiescence that threatens safe oil exploration in Cuban waters. The argument is the Castro regime will be propped up if oil is found and the US should impede anything that might make it more powerful.

Seriously? Will Cuban-American hawks with disproportional political clout impose their outdated Cold War mentality that has harmed US interests at least as much as the Castro regime? The vast majority of Americans, including Republicans, frankly stopped caring about Cuba decades ago and even a majority of the mostly Floridian Cuban community now favors more rapprochement to influence an unstoppable democratic transition in Cuba.

The US should be cheering, not just because any significant oil find will contribute directly and immediately to American energy security. Assuming lifting the embargo is still too politically risky (and it shouldn’t be), Congress should seize the imminent arrival of the rig, the Norwegian designed Scarabeo 9, to relax the embargo on the communist island to allow US energy companies to partake in Cuban exploration and production.

Forget the fact that being communist or anti-democratic is no deterrent to American energy industry elsewhere. The US already imports almost 10 percent of its oil from Cuba’s closest ally Venezuela. Should the US now also penalize all companies investing there, including American ones?

It makes no sense to thwart Cuban efforts to increase oil output perhaps in as little as three years, especially considering oil prices that will remain stubbornly high because demand growth is rising faster than supply growth.

Washington should prioritize the broader interest of Floridians and Americans over local political mavericks and sign all the necessary protocols to allow US companies and organizations to help out in case of any spill. It’s in America’s interest that Cuba get access to the best spill containment technology and knowhow, which is American, not surprisingly.

Besides, Cuba will proceed with exploration regardless of what the US does. Bills in Congress that will likely fail are calling for companies involved to be punished with the loss of US oil leased acreage if they go ahead with exploration. They might, best case scenario, delay production for some time, without scratching the Castro regime. It would simply serve no purpose.

The only company that would be affected would be Spanish Repsol, also an important player in deep offshore drilling and production in the Gulf of Mexico and Brazil. It will be the first to drill. No law is being broken as the rig was tailored made to make sure that less than 10 percent of the parts were American. And Repsol has offered to let US officials inspect it and has given assurances that its operations will follow American safety guidelines.

Repsol “has volunteered to comply with all United States regulations while drilling in the Gulf of Mexico,” said US Interior Secretary Ken Salazar in June in Madrid after meeting company executives. Salazar’s visit followed letters from Congress to Secretary of State Hillary Clinton demanding pressure on Spain to delay the drilling.

That in itself is unwelcome geopolitical meddling at any level and harms American efforts to get access to oil elsewhere. It also gives legitimacy to unfounded concerns over Cuba drilling. Even the Cuban government is cooperating with American officials. The International Association of Drilling Contractors met in Havana with Cuban energy officials drafting offshore regulation, which reportedly is based on US safety standards after the BP spill.

“They know what they’re doing, and they’re very credible about what they’re putting in place,” Lee Hunt, president of the IADC was quoted as saying. “They conducted in-depth research on both offshore drilling regulations and safety practices, and have gone largely to Northwest Europe, specifically Norway and the United Kingdom, as well as to IADC for the structure of their regulations.”

The Scarabeo 9 is designed to operate at more than twice the depth that Repsol and other oil companies waiting for their turn at the rig will drill. Other players include Norway’s StatoilHydro, India’s ONGC, Russia’s Gazprom, Malaysia’s Petronas, Venezuela’s PdVSA, Angola’s Sonagol, and apparently China’s CNPC.

The deepest planned exploratory well will be drilled below 5000 feet of water, at the same depth as the Macondo Deepwater Horizon accident. Companies are all well reputed companies that will not risk relations with the US over safety concerns. Repsol has been involved in off shore drilling in the Gulf of Mexico a lot deeper than the ones it’s planning.

Reason enough, one might believe, for the Obama administration to heed advice from the co-chairman of the panel that made a series of recommendation on offshore drilling after Macondo. Instead, his advice is being hushed.

“I have been causing grief to the State Department,” William Reilly, the former EPA chief under President George H.W. Bush. Cuba’s drilling is “something that’s very important to us, I think, given that they”re drilling 50 miles off Key West, so I”ve asked to be invited to Cuba to talk about the report and have had my wrist slapped by the administration for raising the sensitive Cuban issue. I had to say, ”I don”t work for you.”

Also, any unilateral US punitive measures against investment in Cuba’s oil sector could risk reciprocal policies that undermine US companies’ interests in other countries. Worse yet, it would heighten risks of environmental damage off the Florida coasts and all but kill any hope of US companies getting a piece of what could be an oil bonanza.

There are anywhere between 5 and 20 billion barrels of recoverable oil in Cuba’s seabed, this according to both US and Cuban estimates. It will take years to develop this and Americans are on paper the best placed to profit from this oil bonanza, as producers and consumers.

I’m no fan of the Castro regime. But the embargo continues to be a useless firewall. And as exploratory drilling starts near Key West, Washington should be strategizing how to use this to America’s advantage.

This is probably the best chance the US has had since Fidel Castro took over in 1959 to influence Cuban policy and its democratic future.

And it’s also the best argument to finally overcome Florida’s banana republic politics to the benefit of American companies. Ending the embargo, at least gradually, would have bipartisan support, seconded by both environmental groups and oil companies.

Or would the Obama administration and Congress prefer waiting until international competitors have divvied up Cuban oil production and supplies?

Andres Cala is coauthoring a book with Michael Economides about US energy security in the American continent called “The Blind Spot: Chavez, Oil, and US Energy Security” that will be published this year.

© 2013 Energy Tribune

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