Oil spill doesn't slow down Cuba's drilling program

Oil spill doesn't slow down Cuba's drilling program
By Johannes Werner, Guest Columnist
In Print: Sunday, May 16, 2010

First, a disclaimer: I don't belong to the "Drill, baby, drill" school.
What I see is mounting evidence that the Deepwater Horizon disaster was
the result of lack of oversight and regulation. But I'm also not a
student of the school of wishful thinking that believes the Big Spill
marks the end of offshore drilling in the Gulf of Mexico.

Unless the United States government makes deepwater drilling
unaffordable — which is unlikely, with increasingly scarce "easy oil"
and steadily rising oil prices — exploration will continue deep
underneath U.S. waters of the gulf. And that's even more the case on the
Cuban side.

Cuba apparently isn't even considering a moratorium, and, while making
things tough and more unpredictable for oil companies in Cuba, the U.S.
embargo isn't able to stop them from drilling, either. Last week — amid
breathless coverage of the Deepwater Horizon spill — a low-profile
Reuters note reported that Repsol YPF, a Spanish oil company, contracted
an exploratory rig with a subsidiary of Italy's Eni SpA, most likely for
offshore drilling in Cuba; the rig is under construction at a Chinese port.

One thing is clear: Next to an end of the U.S. embargo, offshore oil
production is the most viable shot in the arm for Cuba's ailing economy,
and, no matter how much some Floridians howl, Havana is far from
renouncing that option. A Cuban-Venezuelan partnership recently started
construction of a $1.5 billion refinery on Cuba's north coast, which
would make little sense without oil flowing from Cuban waters in the
gulf. As Tampa lawyer Al Fox puts it: "We have no jurisdiction to tell
Cuba what they do in their waters."

Which brings me to the breaking-news part of this column: Fox — a
longtime behind-the-scenes mover and shaker in U.S.-Cuba relations who
has been working with U.S. oil industry groups for at least five years —
told Cuba Standard on Wednesday he had just received a letter from the
Office of Foreign Assets Control allowing the International Association
of Drilling Contractors to send a delegation to Cuba.

The upcoming visit is remarkable because it marks the first time in at
least a half-century that a U.S. oil industry delegation is on the
island. This is another stepping stone in the industry's gradually
rising and increasingly public opposition to the U.S. embargo.

The way the Houston-based oil group frames it, the planned trip is not
about doing business. The travel license from the U.S. Treasury
Department's embargo minders opens a window through August for an IADC
delegation to brief Cuban officials on state-of-the-art deepwater
drilling technology and techniques, as well as safety and environmental
standards, the group says.

Now, the Deepwater Horizon leak is still spewing an estimated 200,000
gallons a day into the Gulf. So a U.S.-based oil group teaching another
country about how to avoid and cope with offshore disasters may look a
bit preposterous.

But letting U.S. oil engage Cuba actually makes a lot of sense, even for
entrenched environmentalists. Spill or not, the U.S. oil services
industry is the global standard setter. The world's cutting-edge
technology and techniques are at home in Houston. And last but not
least, U.S. companies and their resources are geographically closest to
Cuban waters.

No matter how good the Chinese-made Italian rig and drilling technology
are, the embargo and distance may become costly obstacles in case of
trouble.

Here's how expert Phil Peters puts it in his "Cuba Triangle" blog: "If
the thing ever goes operational and there's a problem with the rig, or a
spill, the scenario will not only be that American officials will be
trying to make contact with Cuban officials for the first time, but the
operator may also be trying to FedEx the needed parts from, say,
Shanghai. Great!"

In a white paper written Tuesday, the IADC makes a strong argument on
how the U.S. embargo counteracts U.S. environmental security interests.

"If we've learned anything in the past few weeks, it's that deepwater
drilling can have a vast environmental impact that reaches far beyond
the site of the well being drilled," the IADC says — an almost
disarmingly naive statement coming from the trade association
representing the companies that do the actual deepwater drilling.

But on to IADC's strong argument: "An oil spill would not heed the
boundary between U.S. and Cuban waters. The existing trade embargo
prohibits even U.S. assistance for containment, cleanup or drilling a
relief well, or capping the well. Due to the existing trade embargo,
absolutely no U.S. resources can be committed to containment or cleanup.
No U.S. rigs, only miles away, could be mobilized for a relief well. No
oversight and expertise from (U.S. Minerals Management Services) of the
(U.S. Coast Guard) can be committed.

"The Cubans must develop a commitment to safe drilling. They need
information sharing and dialogue to achieve this."

The IADC trip comes while a law is pending in Congress that would exempt
oil business-related travel to Cuba from U.S. sanctions. No news on that
one, but I'll stay in close touch with Al Fox to keep you abreast.

Johannes Werner is editor of Cuba Standard (cubastandard.com) and
columnist in a variety of business publications.

http://www.tampabay.com/news/business/energy/article1095064.ece