Cuban oil project fuels US anxieties

Cuba hopes the Scarabeo 9 rig will help to expand its oil industry

A massive $750m (£473m) Chinese-built oil rig, the Scarabeo 9, is due to arrive in Cuba before the end of the year, to begin drilling a series of exploratory wells.

A whole range of international oil companies from Spain, Norway, Russia, India, Vietnam, Malaysia, Canada, Angola, Venezuela, and China - but not the US - are lining up to hire the rig and search for what are believed to be substantial oil deposits.

"We will drill several wells next year and I'm sure we will have discoveries. It is not a matter of if we have oil, it is a matter of when we are going to start producing," Rafael Tenreiro, head of exploration for the Cuban state-owned oil company Cupet, confidently predicts.

The Spanish company Repsol will be the first to drill, with an exploratory well in extremely deep water just 50 miles (80km) off the coast of Florida.

Be prepared

It has sent alarm bells ringing in the United States because if there were an accident, the ocean currents would push any oil spill onto Florida's beaches and the Everglades.

Yet under the US trade embargo, neither American firms nor the Coast Guard could come to Cuba's assistance or provide much needed equipment such as booms, pumps, skimmers and oil dispersant systems.

The Cubans would need to turn to the Norwegians, British or Brazilians for help.

"In the event of a disaster we are talking a response time in terms of equipment of four to six weeks as opposed to 36 or 48 hours. This is a serious impediment," warned Lee Hunt, president of the Texas-based International Association of Drilling Contractors.

Mr Hunt was part of a team of oil industry and environmental experts who were given permission by the Obama administration to visit Cuba to discuss safety issues with the authorities in Havana.

Leading the group was William Reilly, a former head of the US Environmental Protection Agency and co-author of the government report into last year's BP oil disaster.

He was impressed with Cuba's awareness of the risks and knowledge of the latest international safety measures.

The explosion and blow-out aboard BP's Deepwater Horizon rig off the coast of Louisiana killed 11 people and spilled 5m barrels of oil into the Gulf of Mexico. It was one of the worst environmental disasters ever to hit the Gulf Coast.

It took 85 days to cap the well head, which was 5,500 feet beneath the surface. The Scarabeo 9 will be drilling in even deeper water.

After his talks with Cuban officials, William Reilly said he found them serious about safety and aware of international best practice but lacking in experience.

He wants to see the US co-operate with Cuba on safety issues and ease the embargo to allow US companies to assist in case of an emergency.

"It is profoundly in the interests of the United States to prepare the Cubans as best we can to ensure that we are protected in the case of a spill. We need to make it 'Key West safe'."

But Florida's powerful Cuban-American lobby has other ideas and with the 2012 presidential election looming, Barack Obama is in a difficult position.

Oil windfall?

The anti-Castro groups want the administration to take action to halt the drilling altogether and not just for safety reasons.

A major oil find would make this communist-run Caribbean island financially independent for the first time since the revolution in 1959.

For more than half a century Cuba has been dependent on the largesse of its ideological allies. First it was subsidised by the Soviet Union, then more recently Venezuela and, to a lesser extent, China.

Cuba has long produced some oil from a series of small onshore and coastal deposits.

Cuba already has a small domestic oil industry

Tourists going from Havana to the beach resort of Varadero drive past several kilometres of nodding donkeys and the occasional Chinese or Canadian drilling rig.

Cuba currently produces about 53,000 barrels of oil a day but still needs to import about 100,000 barrels, mainly from Venezuela.

Its deep territorial waters, though, lie on the same geological strata as oil rich Mexico and the US Gulf.

Estimates on just how much offshore oil Cuba is sitting on vary. A US Geological Survey estimate suggests 4.6bn barrels, the Cubans say 20bn.

Even the most conservative estimate would make Cuba a net oil exporter. A large find would provide untold riches.

It is one of the US-based anti-Castro lobby's worst nightmares.

"The decaying Cuban regime is desperately reaching out for an economic lifeline, and it appears to have found a willing partner in Repsol to come to its rescue," Ileana Ros-Lehtinen, the Cuban-born Republican and Chairwoman of the influential House Foreign Affairs Committee, said in a statement recently.

The Florida Congresswoman and a group of 33 other legislators, both Republican and Democrat, wrote to Repsol warning the company that the drilling could subject the company to "criminal and civil liability in US courts".

Repsol responded saying that its exploratory wells complied with all current US legislation covering the embargo as well as all safety regulations.

If oil exploration goes well, Cuba could meet its energy needs and become a net exporter

It has also agreed to allow US officials to conduct a safety inspection of the Chinese rig before it enters Cuban waters.

Under the embargo it is limited to just 10% American technology.

The rig was fitted in Singapore and the one piece of US equipment which was installed was the blow-out preventer.

It was the failure of BP's blow-out preventer which was at the heart of that disaster.

According to Lee Hunt, the Scarabeo 9 is a state of the art deep-water rig and there are six similar platforms built at the same Chinese shipyard currently operating in US waters.

For the moment environmental concerns appear to be taking precedence over politics.

The government will take up Repsol's offer to inspect Scarabeo 9 and a limited number of licences have been issued to US clean-up operators to enter Cuban waters and assist in the event of a spill.

But the arguments are far from over as environmentalists are pushing for greater co-operation while Cuban-American groups are looking at ways to place legal and legislative hurdles in the way.