American companies eye Cuba's offshore oil

If American oil companies are allowed to drill in the Gulf of Mexico, when will they be permitted to engage in offshore oil exploration in Cuba?

That's one of the questions some analysts are asking after Sen. John McCain and Gov. Charlie Crist recently suggested lifting the 26-year-old moratorium on drilling off Florida's coast.

American oil companies have long had their eyes on Cuba's offshore potential. The U.S. Geological Survey has estimated that Cuba could have somewhere between 4.6-billion and 9.3-billion barrels of oil as well as even greater quantities of natural gas. That's about half the size of the estimated resources in the Gulf of Mexico.

"It's ironic that the Bush administration won't allow American companies to exploit those reserves — just because it's Cuba," said former U.S. Ambassador Vicki Huddleston, who is leading a project at the Brookings Institution in Washington looking at U.S. policy toward Cuba.

Cuba reportedly plans to start drilling sometime next year. It lacks the money and technology to develop the resources itself so it has sold rights to a number of major oil companies, including Repsol (Spain), Norsk Hydro (Norway) and Petrobras (Brazil).

Cuba's offshore oil has the potential to make Cuba self-sufficient, perhaps even a modest exporter of oil. But, under a four decades-old economic embargo, American companies are barred from participation in Cuba's energy industry. Washington has long argued that permitting U.S. companies to invest in Cuba was unacceptable as it would help perpetuate communist rule on the island.

Opening Cuba to American petroleum companies could favor U.S. interests, says Huddleston, who served as head of the U.S. diplomatic mission there from 1999 to 2002. Letting U.S. companies into Cuba would give the United States greater influence over the technology and environmental safety of Cuba's offshore drilling.

"Why can we buy from Venezuela and not Cuba? That kind of boggles the mind right there," she added, noting that Venezuelan President Hugo Chavez currently represented a greater threat to U.S. interests in Latin America than Cuba.

As with the Gulf of Mexico, oil drilling off Cuba is a potential risk to Florida's coast. However, the Gulf Stream in the Florida Straits, which pushes the ocean current from west to east and out into the Atlantic Ocean, provides some protection.

Sen. Bill Nelson of Florida wants to block drilling in Cuba, saying its northern-most limits lie only 45 miles off Key West, posing a serious risk to the Florida Keys in the event of an oil spill.

U.S. oil companies have not hidden their interest in Cuba. "In general, we favor greater access to all areas," said Karen Matusic, a spokeswoman for the American Petroleum Institute, the oil industry's trade association.

"It's frustrating to see they (Cuba) are moving forward with developing their energy resources, and yet we can't," added David Mica, director of the Florida Petroleum Council.

Several U.S. oil companies attended a controversial meeting with Cuban officials in Mexico City in February 2006. The meeting was briefly interrupted after U.S. officials ordered the meeting be moved out of the hotel — a member of the Sheraton chain.

"Some of those characters continue to contact me and ask 'When can we get into Cuba?' " said Jonathan Benjamin-Alvarado, an expert on Cuba's energy industry at the University of Nebraska.

But Benjamin-Alvarado isn't holding his breath when it comes to the Bush administration lifting restrictions on U.S. companies in Cuba.

"It won't happen. That's just an article of fact," he said.

Cuban embargo supporters have been circling the wagons over the oil issue for the past couple of years. In March last year, Rep. Ileana Ros-Lehtinen, R-Miami, filed a bill that would deny visas and impose a $1-million fine on any employees of a company that "contributes to the development of Cuba's oil-exploration program."

With a new administration or a significant oil find, the U.S. position might change, says Benjamin-Alvarado. But it would still require Congress revoking many of the elements of existing embargo legislation.

Huddleston rejects the argument that allowing American companies to become involved in exploiting Cuba's oil would help strengthen communist rule.

"If we don't do it, others will," she said.

David Adams can be reached at dadams@sptimes.com.

American companies eye Cuba's offshore oil 06/26/08 [Last modified: Saturday, June 28, 2008 6:37pm]

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