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Magazine / Need to Know: Energy

Drill, Bebé, Drill

Cuba is about to drill for offshore oil with “second-tier parts” because of the trade embargo. That’s not good news for U.S. beaches.

Coming soon to Cuba: Offshore oil rigs.(Jasper van der Meij)

photo of Coral Davenport
July 28, 2011

Sometime over the next three months, if all goes according to plan, Cuban workers on a Chinese-built, Spanish-owned rig will start drilling for oil in the mile-deep waters just off the north coast of Cuba, 70 miles from the Florida Keys.

If the drill hits a major oil deposit—and all geologic signs indicate it will—the discovery will unleash a cascade of developments with profound political, environmental, and economic consequences.

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The Cuban government has long wanted to extract the rich reserves of oil and natural gas believed to lie off its shores. Estimates for oil range from 5 billion to 20 billion barrels, while the estimate for natural gas is 8.6 billion cubic feet. Unlocking that oil could jump-start a nascent Cuban offshore-oil industry—and free the island nation from its energy and political dependence on Venezuela, from which it imports 60 percent of its oil today. A newfound independence from its socialist neighbor and its mercurial president, Hugo Chavez—coming at a time when the Cuban leadership is facing change with the eventual demise of Fidel Castro—is an appealing prospect to the United States.

But the potential of a closer relationship with Cuba comes with a terrifying specter: An oil blowout in Cuban waters could reprise the nightmare that was last year’s Gulf of Mexico oil spill, and send crude spewing to the beaches of Florida, Georgia, and South Carolina. And the likelihood for such a disaster is very real, say oil industry experts, thanks in part to Washington’s 49-year-old embargo on Cuba.

Because of the embargo, U.S. companies cannot drill in Cuba, supply equipment to Cuba, have any say over safety regulations in Cuba, or even take part in helping control a blowout and spill in Cuba. As the island prepares to begin offshore drilling, it has signed contracts with oil companies from Brazil, India, Italy, Russia, and Spain—and is in talks to lease major portions of its coastal water to Chinese companies (continuing China’s pattern of pursuing oil exploration in countries where U.S. drillers aren’t welcome).

Under the embargo’s terms, the oil drilling and safety equipment used by those companies must be less than 10 percent U.S.-made. But all of the most technologically advanced equipment for drilling and preventing or stopping oil spills is made in the United States or by U.S. companies.

“There are not international suppliers of this level of equipment. They will have to buy copycat or second-tier parts,” Lee Hunter, president of the Houston-based International Association of Drilling Contractors, told National Journal. Hunter and other experts say that, to date, it appears that the Cuban government, fearful of the devastation an oil spill could wreak on its economy, wants to use the lessons learned from the BP oil disaster to develop a rigorous safety and oversight program. But it will be nearly impossible for drillers in Cuba’s waters to legally use the safest equipment. “The Cubans want to use good technology; they want to drill safely,” Hunter said. “But … their ability to drill safely is extremely compromised.”

Also deeply compromised is their ability to respond to a disaster should it occur. Even if oil from a Cuban spill laps at Florida’s shores, the U.S. agencies and oil companies that have all-too-hard-won expertise in wrestling a spill—the Coast Guard, the Federal Emergency Management Agency, and the Interior Department—would be banned from crossing into Cuban waters to help. And experts say that the Cuban oil industry and government don’t yet have a fraction of the resources and expertise they would need to deal with such an event on their own.

State Department officials are well aware of the problem, and they are working with Hunter’s group, along with others, to find a way for U.S. companies to get into Cuban waters—if not to drill, at least to help out in case of a spill. One way this could happen is if the Treasury Department issues special advance licenses granting U.S. companies the ability to travel to Cuban waters to give aid in a disaster. Cuban officials are also cautiously indicating interest in cooperating with the U.S. on the plan, despite the embargo.

“This is something that could get Cuba and the U.S. sitting down and talking, finding points of agreement and cooperation,” said Jorge Piñón, a former president of Amoco Oil Latin America and a current visiting research fellow with Florida International University’s Cuban Research Institute.

It is also something that is likely to further ignite the fight over opening up more U.S. waters for drilling, pointed out Piñón and many others. Currently, most of the eastern portion of the U.S. Gulf of Mexico—which borders the water where the Chinese, Indians, and Russians would be operating off Cuba—is closed to drilling. But defenders of the U.S. drilling ban will be hard-pressed to keep it in place, no matter the risks, if two things happen: if oil-producing rigs pop up in Cuban waters, and, in the coming years, in the surrounding waters of Mexico and even the Bahamas, which is now looking into starting offshore drilling.

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