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Cuban Oil Demands Washington’s Attention

June 22, 2011

 

Cuban Oil Rig Scarabeo 9

On the brink of oil exploration, newfound petroleum and natural gas deposits near Cuba, as well as pressure at the pumps, may push Washington to lay the foundation for more open relations with Havana.

In 2008, the U.S. Geological Survey estimated between 7 to 14 billion barrels of oil were trapped within Cuba’s continental shelf. Three years later, the Cuban government and Spanish oil company Repsol YPF, estimate that over 20 billion barrels of oil are sitting under the ocean floor just a few miles off the north-west end of the island, waiting to be exploited. As part of a multinational partnership, Scarabeo 9, a semi-submersible drilling rig, owned by the Italian oil company, Eni SpA, is currently being constructed by the Chinese in Singapore. Nearing completion, the oil rig is scheduled to be towed to Cuba by September or October of this year. While future oil revenue will have obvious economic benefits for the island nation, this recent oil discovery may also force Washington to relax its incredibly stale trade embargo.

At the same time, the spike in global oil prices has persuaded the Obama administration to open up delicate environmental domestic regions for drilling. In his May 14th Weekly Address, the U.S. president outlined a handful of strategies to alleviate skyrocketing oil prices. One of these strategies calls upon the Department of the Interior to accept bids for annual leases for oil drilling in Alaska’s National Reserve and in the Gulf of Mexico while, theoretically, “respecting sensitive areas.” To allow oil companies more time to catch up with the newly enhanced environmental and safety standards, Obama’s administration has consistently extended leases already granted for drilling in the Arctic Ocean and the Gulf of Mexico. However, these measures could not possibly affect oil prices significantly; after all, Americans consume over 20 percent of the world’s oil supply, yet produce a mere five percent of what they consume. Furthermore, OPEC’s refusal on June 8th to increase oil production shot oil prices up by as much as USD 2 a barrel. Cuban oil would provide an immediate, possibly convenient source of nearby oil for the United States. Nevertheless, this black gold will not even remotely benefit the U.S. financially if Washington mechanically refuses to engage in dialogue with Havana.

 

World Oil Consumption by Region

Moreover, given the crisis brought on by BP’s Deepwater Horizon in April of 2010, it will be in the best interest of the United States to cooperate with Cuba to generate some sort of contingency plan in the event of another environmental catastrophe. Because the new Chinese-built rig can drill in waters as deep as 3,500 meters, just short of Deepwater Horizon’s capacities, the potential for large-scale blunders is relatively high. The proximity of the Cienfuegos well site, about 50 miles from the coast of Florida, demands Washington’s protective eye. Furthermore, the current U.S. trade embargo blocks a range of U.S. commodities from Cuban markets while also limiting the use of American drilling technology to ten percent. The Scarabeo 9 does not utilize American technology, thus being able to operate under the current embargo. By the same token, Cuba would be unable to use any U.S. containment technology, compelling Cuba to seek such technology from distant partners in the North and Mediterranean Seas. This lag in response-time would only exasperate the dangerous scope of damage that could be done to the Gulf Coast in the case of another disaster.

 

Gulf Oil Spill Containment

Innovations in drilling technology have given the Scarabeo 9 the advanced capability of drilling horizontally, striking concerns in both the U.S. and Mexico over the potential siphoning of their oil reserves. In mid-April, the undersecretary of Mexico’s Ministry of energy, Mario Budebo, called for talks between the three nations to clarify this haziness resulting from this jurisdictional dispute. Washington’s fairly amicable relations with Mexico may give way to successful mediation between Capitol Hill and Havana.

While Washington seems to be returning to the redundant and illogical “drill, baby drill” mentality, it is essential that domestic and international safety as well as environmental regulations, be made a top priority. For the first time in recent memory, partial reconciliation with Cuba would dramatically advance U.S. interests. Ignoring all other motivations, extending the olive branch to Cuba is utterly necessary to protect American consumers and their environment.

Written by COHA Research Associate Paula Lopez-Gamundi

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6 Comments leave one →
  1. Phil permalink
    June 23, 2011 6:17 pm

    ” Cuban oil would provide an immediate, possibly convenient source of nearby oil for the United States. Nevertheless, this black gold will not even remotely benefit the U.S. financially if Washington mechanically refuses to engage in dialogue with Havana.”

    I am having a hard time seeing how will it provide an immediate source of oil? Offshore drilling is among the most extensive ways to get oil to the market. Although the Cubans already have a semi-sub being shipped in, this is just one piece of an enormously big puzzle. Also, getting oil rigs is a difficult task in itself, as the market is chronically short. (http://www.nytimes.com/2008/06/19/business/19drillship.html)
    One is talking anywhere from 4 to 6 years before the Cubans can really become an oil exporting nation, given that oil prices stay high and they are able to build up the required infrastructure.

    Secondly, how much production are we talking about realistically bringing on line? Even if we were to look at the optimistic 20 billion barrels number, this still needs to be taken with a grain of salt. Is this simply an estimated number? When we find out the number of proven reserves, then the number of recoverable reserves can we really find out how much oil we are taking about. Even with that, there is still the recovery rate to take into consideration. Right now, the Norwegians who are arguably the best at offshore is only having a 50% recovery rate, meaning they are actually only getting up 50% of the oil. (http://www.energybulletin.net/node/1651) Now even if we again look at things super optimistically and estimate that there are still between 6 to 9 billion barrels of oil recoverable, its still gonna take a heck-uva long time to bring production up to speed where one can talk about becoming a serious exporter of oil.

    Great piece though, all in all. Hopefully this silly embargo will stop soon. Pardon any typos.

    • The Author permalink
      June 24, 2011 12:24 pm

      You brought up some solid points, Phil.

      No one will really know how much oil the Cubans can truly produce until they begin actual oil exploration. Only once they start drilling can any geologist determine if their estimates were accurate or not. Although the rich oil reserves in the Gulf of Mexico are making the Cubans rather optimistic.

      Your right about Cuba’s production capacity. Since Cuba only recently discovered this oil supply they have not caught up in production technology; but with foreign enterprises jumping at the opportunity to invest in Cuban oil (Spain’s Repsol, Russia’s Gazprom, Malaysia’s Petronas, NORWAY’s Statoil and many others), my guess would be that they would also make significant investments in production technology.

      Cuba will probably not be a serious exporter of oil in the immediate future– but their oil reserves will at least wean them off of their dependency on subsidized Venezuelan oil. As far as the U.S. goes, our current energy policy (or lack there of) indicates that we will be searching for whatever oil is in our grasp. I can’t imagine that the U.S. will find a suitable new energy source in the next decade or even the next 15 years.

      Pardon any typos on my end as well!

  2. Luis permalink
    June 29, 2011 10:11 am

    El tema del petroleo en Cuba, es un asunto del que se lleva hablando varios años y hasta el momento, todo lo que se ha dado es que en alguna de las zonas que se han concedido para la exploración, esta ha sido abandonada.
    Según los diferentes estudios, es posible encontrar el preciado oro negro en aguas territoriales cubanas, si bien es cierto que, el actual panorama político, podría estar aconsejando a las empresas concesionarias, el intentar dilatar la exploración y la extracción, hasta que se clarifique el futuro político de La Isla.
    Para decirlo de otra manera, las empresas concesionarias, estarían esperando a la obtención de garantías, en cuanto al futuro de unas explotaciones petrolíferas, de las que corren el riesgo de poner en funcionamiento, para que, en el corto plazo de tiempo, puedan ser ilegitimadas las concesiones y con ello expropiada la concesión.
    El problema principal es el haber firmado el negocio, con representantes de una dictadura, de la que todo el mundo estima que, no va a sobrevivir a la muerte de los Hermanos Castro, los cuales ya sobrepasan los dos, la edad de 80 años y lo que haya de venir después, nadie lo sabe con ninguna certeza, dada la des estructuración de los movimientos opositores, lo que impide la obtención de garantías a dos bandas.
    La obtención de petroleo por parte de Cuba, siempre y en cualquier circunstancia, será percibido como positivo, aún cuando solo sirviese al auto abastecimiento y a dejar de depender de las ayudas venezolanas, tanto por parte de la actual dictadura, como del futuro gobierno.
    Por su parte, REPSOL, una multinacional Española, se ha comprometido con el Gov. USA, a practicar las extracciones de crudo, en la aplicación de las Leyes USA, en materia de seguridad, y consiguientemente, supongo que, habrán mostrado su disposición a ser inspeccionados, por las autoridades USA. Dado que, la vertiente de la seguridad, es algo a valorar, cuando se habla de pozos petroleros en el Golfo de México, creo que, con el compromiso de la empresa española, no quedan muchas dudas en cuanto los riesgos, de contaminación, o que se pueda controlar si se diese esta.

  3. Luis permalink
    June 29, 2011 10:32 am

    Yo no veo que el asunto del petroleo, tenga que afectar en lo inmediato, al otro tema del embargo, salvo que huviese empresas norteamericanas que pretendiesen entrar en la subasta de concesiones, pero no olvidemos que, el embago USA, tiene su génesis en un conflicto en cuanto a que una compañía USA, propietaria de una refinería en Cuba y obligada por las leyes federales, se opuso al refino de petroleo de origen sovietico, lo que produjo la respuesta de expropiar tanto la refinería, como el resto de bienes, propiedad de empresas USA y a su vez, la contra respuesta del embargo. En este momento, la refinería mencionada, está gestionada a partes iguales, por parte del Gobierno de Castro y la compañía venezolana PVSA, lo que complicaría la restitución necesaria, para forzar la participación en la extracción de las empresas USA.
    En cualquier caso, todo esto viene a redundar en mi tesis inicial, se estaría retrasando la extracción y supongo que, ralentizando la apertura de pozos, en función de dejar pasar el tiempo, a fin de que se clarifique el panorama político, para firmar los contratos, con un representante legítimo, evitando las sanciones que por parte del futuro gobierno cubano, se pudiesen dar contra las empresas concesionarias y una lógica acusación de colaboracionismo con la dictadura.

  4. Luis permalink
    June 29, 2011 10:42 am

    GOOGLE TRANSLATION COMMENTARY

    The issue of oil in Cuba, is an issue that has been talked about for several years and so far everything has been given is that in some areas that have been granted for exploration, it has been abandoned.
    According to different studies, it is possible to find the precious black gold in Cuban territorial waters, while it is true that the current political landscape could be advising the concessionary companies, trying to delay the exploration and extraction to clarifying the The island’s political future
    To put it another way, the concessionary companies, would be waiting to obtain guarantees about the future of some oil fields, of which run the risk of commission, so that in the short period of time, can be illegitimate concessions and thus expropriated the concession.
    The main problem is signing the business, with representatives of a dictatorship, everyone believes that it will not survive the death of Castro Brothers, which already exceeded the two, aged 80 and what is to come later, no one knows with any certainty, given the structure des opposition movements, which prevents the assurance it both ways.
    Getting oil from Cuba, provided under any circumstances, be perceived as positive, even if only serves the auto supply and stop relying on Venezuelan aid, both by the current dictatorship, and the future government.
    For its part, REPSOL, a Spanish multinational, has committed to the Gov. USA, to practice the extraction of crude oil in the application of U.S. laws, safety, and consequently, I suppose, have shown their willingness to be inspected by U.S. authorities. Given that the aspect of security is something to appreciate when it comes to oil wells in the Gulf of Mexico, I think that with the commitment of the Spanish company, there is not much doubt about the risks of contamination, or can be controlled if you give it.
    I do not see the issue of oil, have to affect the immediate, the other issue though, unless U.S. companies huviese wishing to enter the auction of concessions, but do not forget that the USA embago has its genesis in a dispute as to a USA company, which owns a refinery in Cuba and forced by federal law, opposed the oil refining of Soviet origin, resulting in response to expropriate both the refinery, like other goods, property U.S. companies and in turn, the response against the embargo. At this time the refinery above, is managed equally by the government of Castro and the Venezuelan PVSA, complicating the return necessary to force participation in the removal of U.S. companies.
    Anyway, all this comes to my initial thesis result, it would be delaying the extraction and I guess, slowing the opening of wells, according to pass the time, in order to clarify the political landscape, to sign contracts, with a legitimate representative, avoiding sanctions by the future Cuban government, it could hit the concessionaires and a logical accusation of collaborating with the dictatorship.

  5. Luis permalink
    June 29, 2011 12:35 pm

    In terms of technology replacement, as I see the author’s comment points to it and for the United States. I am of the opinion that, in many cases the technology is invented and tested for decades, much of it was carried to the U.S. as war booty from the German laboratories, for example, extraction of oil, based base coal. Subsequently, it has been invented several times, the engine that runs on water, if it is true that had the problem of overheating and that some years ago does not make up again (in the mid- 60 and without leaving Spain was inventava new one every year and we have one working in a museum in Barcelona, ​​for many years) so well is that with the application of new ceramic materials, the issue of overheating, should be overcome.
    At this point seems to be betting as an option for the future, the electric motor as well as in USA, is investigating the transmission of electrical energy without wires. At the time this note the above tecnonogía could be established on the road points wireless energy supply, reducing the need for batteries and the time required for recharging and can be billed consumption meters connected by telephone with suppliers energy, which is already operating in the domestic meters.
    We see that alternatives to oil, there seem to some, but on the other hand, appear to be in a drawer, under the heading of secrecy, of interest to the defense or another, but working for the interests of oil companies, interested in changing anything.
    In many cases, operate new technologies, is a matter of policy decisions, the technology is available and in many cases, such as the electric motor, infinitely cheaper to build, than they are the engines gasoline, where a single parent and working at 300 beats per minute, can cut the magnetic sheet assembly while leaving stapling and compacted at a speed of at least 4 per minute engine, one for each wheel motor concept used for example in BMW, where if beterías are eliminated, the cost of the vehicle will be lower than a gasoline car. The downside of this system is the need to establish many posts or poles supply along the entire road network, so that the vehicle could capture the energy, connecting the poles of supply, or what is the same, a strong infraestrucctura spending, but in my opinion, this should perhaps be bet for the future, as a compromise, non-polluting, non-dependent and consistent with the collection of taxes and the interests of energy suppliers.
    As for the extra power generation, I decantaría by nucjlear, fusion or fission and arguments of economy and reliability.

    Mistakes are the translator GOOGLE

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