Cuba Plans New Offshore Drilling in Search for Big Oil Finds in the Gulf of Mexico

Should the U.S. trade embargo be eased to allow for energy cooperation?

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HAVANA—Cuban officials say that exploratory drilling to assess the potential for oil reserves in the Gulf of Mexico is likely to resume in the second quarter of this year, a sign that lower world oil prices have not derailed efforts by the Cuban government and its foreign corporate partners to keep moving toward offshore oil production.

Cuba believes it has major oil reserves in its waters. But the prospect of exploratory drilling—followed by likely future commercial drilling—in the Florida Straits has fired controversy in the United States, with the expectation that someday, foreign oil firms could be drilling as close as about 50 miles from parts of Florida.

The exploratory drilling will take place about 20 miles north of Havana and will be conducted by a consortium led by the Spanish oil firm Repsol, working with India's state-run Oil & Natural Gas Co. and Norway's StatoilHydro. Other exploratory drilling in the portion of the Gulf under Cuba's economic control is anticipated in 2010 and 2011.

"Cuba has high potential from an exploratory point of view," said Rafael Tenreyro Perez, exploration manager for Cubapetroleo (Cupet), the Cuban state oil company, in an interview. Seismic tests suggesting possible oil deposits over the past two years in Gulf waters were "very encouraging," he said.

Other firms that have, to varying degrees, partnered with the Cuban oil company in the hunt for oil either on or offshore hail from Venezuela, Malaysia, Vietnam, China, Canada, and Brazil. U.S. companies are barred from participating under regulations flowing from the 48-year-old American embargo of Cuba's economy. That widely criticized policy was intended to pressure Cuba's communist government to move toward democracy, but other countries oppose the U.S. isolation strategy toward Cuba and do business anyway.

Foreign firms have signed exploration and production agreements for 21 of the 59 blocks Cuba has created for its Gulf waters, where the biggest oil finds are believed to be located. An additional 23 blocks are said to be the subject of discussions with foreign companies.

Cupet has estimated that there are 20 billion barrels of recoverable offshore oil in Cuban waters. If that bears out, Cuba, with 11 million people, would have reserves that come into the same range as those of the United States.

The U.S. Geological Survey, though, has issued more conservative estimates: under 5 billion barrels in Cuba's offshore fields. Furthermore, most of the oil is believed to lie under deep water, where extraction is difficult and expensive.

Some see the advent of Cuban offshore oil drilling as raising the costs of maintaining the embargo policy, with other countries taking a piece of the Cuban action that might otherwise fall to some American firms. Some Capitol Hill lawmakers have urged that an exception be made in the embargo to permit energy cooperation. Overall Cuba policy is now under review by the Obama administration.

Others are worried that a future oil spill, given Gulf currents, could spoil Florida beaches and shore areas. Tenreyro says that any drilling operations will follow "the highest" international environmental standards.

Some Cuba watchers argue that environmental coordination with Cuba ought to be one of the early results of any policy changes developed by the Obama administration.