Oil spill: a boon for Cuba?

Updated on
The World

HAVANA, Cuba — The worst oil spill in U.S. history may not be such a bad thing for Cuba — assuming that the crude now fouling up the Gulf never reaches the island's shores.

It's an environmental threat that also comes with a potential economic opportunity. Cuba’s untapped offshore reserves are growing increasingly attractive to U.S. oil companies with every gushing barrel into the Gulf, some experts say.

Cuba has 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas in undersea deposits off its northwest coast, according to U.S. Geological Survey estimates, enough to put the country on par with major regional exporters like Colombia and Ecuador. Cuban geologists say there may be four times that amount in vast hydrocarbon pools under Cuban-controlled waters farther out into the Gulf.

The Castro government has already signed deals with nearly a dozen foreign oil companies interested in drilling those waters, including Brazil’s Petrobras, Norway’s Statoil and a unit of India’s ONGC. It has also extended invitations to U.S. oil companies, which are currently barred from doing business with Cuba under the half-century-old trade embargo.

The restrictions have been enforced so zealously that when American oil executives attempted to meet with Cuban officials at a 2006 energy summit in Mexico, the U.S. Treasury Department had the Cuban delegation kicked out of the conference hotel.

But several events in the past few weeks have brought the U.S. oil industry closer to Cuba. For the first time, Treasury officials have given American oil industry representatives permission to travel to Cuba, having denied previous travel requests. Executives from the International Association of Drilling Contractors say they’re now preparing a three-day visit to the island to discuss safety and environmental standards with their Cuban counterparts.

At the same time, Cuba and its foreign partners are moving forward with their own offshore agenda. According to Reuters, Spain’s oil giant REPSOL has contracted for a Chinese-built rig that could begin drilling in Cuban waters later this year. That plan raises new concerns about the possibility of environmental damage to Florida if an accident were to occur on a rig in nearby Cuban waters.

Because of the embargo’s trade restrictions, Cuba would have no access to the U.S.-based companies that respond to oil spill disasters and conduct cleanup operations, according to a recent white paper authored by the drilling contractors association.

“This island nation continues to gear up for serious offshore drilling — including in deep waters in relative proximity to Florida’s coastlines, beaches and marine habitats,” the document warns. “A blowout offshore Cuba could wreak catastrophic environmental consequences on the U.S. far worse than in Cuba itself.”

The association's president, Lee Hunt, said his group was not traveling to the island to conduct business with the Cuban government. He said the purpose of the trip was to share information on safety practices and environmental safeguards.

Several of the foreign companies being considered for drilling in Cuba are also members of a Houston-based trade group, Hunt noted.

Still, Cuba energy experts say that the Deepwater Horizon disaster has forced the U.S. government to allow American oil companies to begin to engage with Cuba, a step that could chip away at the trade embargo. An energy bill in the U.S. Senate sponsored by Sen. Lisa Murkowski (R-Alaska) and Sen. Mary Landrieu (D-La.) includes a provision that would essentially exempt U.S. oil companies from the Cuba trade embargo, arguing it would be in the interest of national security.

And if the massive Gulf oil spill makes drilling in U.S. waters more difficult, it makes Cuba all more appealing, according to Jorge Pinon, a Cuba energy expert at Florida International University and the former president of Amoco Oil Latin America.

“If the U.S. government places onerous restrictions — taxes, legal, bureaucratic red tape, etc. — on oil companies operating in the U.S. Gulf of Mexico, it will force them to explore and develop hydrocarbon resources on the Cuba side of the Gulf of Mexico,” said Pinon, who advocates U.S. involvement in Cuba’s oil industry.

While it seems hard to fathom now, he said, “there is a chance that in three to five years the fiscal and commercial terms and conditions for drilling for oil and gas in Cuba will be more attractive than in the U.S.”

Pinon: “If major resources are found, Cuba could eventually become an important and strategic supplier of oil to the U.S.”

Multiple legal and political barriers would stand in the way of such a partnership with the Castro government. But the U.S.’s pressing energy needs and the threat of another environmental disaster could force the long-estranged neighbors into a new relationship, said Jonathan Benjamin-Alvarado, a political scientist and Cuba energy scholar at the University of Nebraska at Omaha.

“Trust and confidence building measures will have to be monitored and evaluated at a pace amenable to both governments,” he said.

Cuba currently produces about 60,000 barrels of oil a day from onshore wells, according to Cuban government data, while receiving more than 90,000 barrels per day in oil and petroleum products from major ally Venezuela. The REPSOL operation is being watched closely, since major oil revenues would provide a huge boost to Cuba’s perpetually struggling economy.

Dissident economist Oscar Espinosa Chepe said that he didn’t think U.S. involvement in Cuban oil development would necessarily be an obstacle to democratic reforms on the island. “The drilling is going to happen one way or another,” he said. “I would rather have the United States involved.”

Sign up for our daily newsletter

Sign up for The Top of the World, delivered to your inbox every weekday morning.