Time to Talk to Cuba about Offshore Oil
By Jorge Piñon and Anya Landau French
Last week, the Obama Administration announced a plan that could soon allow oil exploration off of the Atlantic seaboard and in the Eastern Gulf of Mexico. For the oil industry and its allies, this is welcome news. For environmentalists concerned about the impact on coastal areas, it’s at best a bad but necessary trade for votes on climate change legislation the President hopes to push through Congress later this year. But is this compromise sweet enough to pass the bill?
Two of the votes Mr. Obama is courting are those of Louisiana Democratic Senator Mary Landrieu and Alaska Republican Senator Lisa Murkowski. Last summer, Murkowski and Landrieu laid down a marker for an energy policy they would support. In it, they proposed opening up many of these same coastal areas to drilling. But the two senators offered one more idea that might get some traction now: an exemption from the larger trade embargo against Cuba for U.S. companies wishing to drill for oil in Cuban waters.
Interest in Cuban deep water oil exploration hit a fever pitch two years ago when then Vice President Dick Cheney aired his frustration that U.S. companies were banned from exploration off the coast of Florida. According to Cheney, “oil is being drilled right now 60 miles off the coast of Florida. But we’re not doing it, the Chinese are, in cooperation with the Cuban government.”
That statement turned out to be not entirely accurate – then. For several years, China had been leasing rigs for Canadian onshore exploration on Cuba’s northern coast, and they also have an onshore block. But China’s CNPC is now in negotiations for several offshore deep water blocks in Cuba. And they’re not the only ones.
In 2004, the Spanish company Repsol made a modest discovery in Cuba’s deep waters in the Gulf. Though the discovery wasn’t commercial, Norsk-Hydro, a market leader in offshore oil exploration, along with ONGC from India, joined the Repsol venture, and they are expected to continue exploration. In 2006, Congress took note, and Arizona Republican Representative Jeff Flake offered legislation similar to Murkowski and Landrieu’s. Flake, a critic of U.S. Cuba policy, reasoned that, “Our current policy doesn't serve our energy needs, environmental concerns, or economic principles.”
Over thirty percent of United States current crude oil production comes from deepwater Gulf of Mexico. Ultra-deep Gulf of Mexico has become a major interest for oil companies after a number of world-class discoveries were made over the past three years. Shell’s recent Appomattox discovery in the deepwater eastern Gulf of Mexico underscores the area’s potential.
While Congress has deep disagreements over offshore exploration – to drill or not to drill – there is one issue on which all sides agree: an oil spill in Cuba’s waters could threaten hundreds of miles of U.S. coastline and marine habitats. The challenge of managing oil spills is only increasing in complexity and magnitude. Deepwater oil exploration is inherently a high risk endeavor even for experienced international oil companies such as Repsol, Norsk-Hydro and Petrobras, which is one more reason why the Murkowski-Landrieu proposal is appealing.
American oil and oil equipment and services companies have the capital, technology, and operational know-how to explore, produce, and refine in a safe and responsible manner Cuba’s potential oil and natural gas reserves; yet, they remain on the sidelines because of our almost five-decade old unilateral economic embargo against Cuba.
Oil spills respect no boundaries, making joint cross-border programs critical. Regardless of who ends up drilling in Cuba’s deep waters, the Obama Administration would be wise to begin bilateral discussions to emphasize the need for contingency planning and cooperation now.
Jorge Piñon is a former president of Amoco Oil Latin America. Anya Landau French is Director of the New America Foundation U.S. – Cuba Policy Initiative.