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Cuba may drill for oil using U.S. equipment

The U.S. embargo has stymied Cuba’s search for oil off its shores.

And so it should, say critics of the ruling communist regime. An oil windfall would boost Cuba’s economy and provide energy self-sufficiency, strengthening one-party rule there.

But new policies announced in January by President Barack Obama may quietly pave the way for change, raising the prospect of offshore drilling near Florida waters even as state leaders work to prohibit drilling here.

At issue is whether Cuba gets access to U.S. drilling equipment, regarded as the best and safest in the world — and if so, how much and which parts.

Answers to those questions take on greater urgency with Cuba’s announcement that it intends to resume exploring for oil by 2016.

Under the current embargo, equipment made with only a small percentage of U.S. content cannot be sold to Cuba or used to benefit its economy. Oil drilling rigs fall under the rule. Other countries honor the embargo by refraining from selling Cuba any parts made in the U.S. to avoid falling from favor with a major trading partner.

But one new Obama policy calls for the U.S. Department of Commerce to license for export to Cuba any items deemed necessary for protection of U.S. coastal environments.

Some leaders in environmental protection and the petroleum industry read this to include those portions of oil drilling rigs that prevent spills.

“It can and should be done,” said Robert Muse, a Washington, D.C.-based attorney who specializes in legal issues brought on by the Cuban embargo.

These parts would be exempt from the embargo, not counted in the percentage, giving Cuba more options. Still others read this Obama policy to mean that an entire rig could be exempt.

The Commerce Department did not respond to a request for comment.

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Only one modern drilling rig is known to be available to the island nation under embargo rules. It is called the Scarabeo 9 — Norwegian engineered, Italian owned and now under contract in Angola.

If the Scarabeo 9 is not available by 2016, Cuba could put its drilling aspirations on hold — or cobble together a rig without modern technology and raise the risk of an environmental disaster that might reach Florida shores in under a week.

The best way to prevent this, says Lee Hunt, a Houston-based drilling expert, is by providing Cuba with U.S. oil drilling equipment and technology meant to prevent spills and pollution.

“It is in our benefit to want every drilling operation in Cuba to have the same standard as is mandatory in the U.S. for the prevention of pollution,” said Hunt, former president of the International Association of Drilling Contractors, an industry leader in training engineers around the world on oil rig safety.

Hunt is helping organize an invitation-only symposium in Cuba this October called “Safe Seas, Clean Seas.”

Guests will include up to 50 representatives from the U.S. oil and environmental industries, 25 from Cuba and another 25 from throughout the Caribbean.

The itinerary includes oil spill response, what areas of Cuba should be off limits to drilling, and which parts of the oil drilling rigs are necessary for environmental protection. If the work can be completed during the symposium, Hunt will provide the Department of Commerce recommendations in these areas.

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Hunt favors allowing Cuba to import environmental technology from the U.S. that’s not available there now, including containment booms that prevent a spill from spreading and skimmers to remove petroleum floating on the water.

But just as important to the environment, Hunt said, is making sure the rig is safe.

A blowout prevention device, for example, stops petroleum from spilling into the ocean if anything fails. Hunt calls it “the first line of prevention and the last line of defense.”

He cited the 2010 Deepwater Horizon disaster in the Gulf of Mexico to show the U.S. needs to update its policy.

A report by the U.S. Chemical Safety and Hazard Investigation Board blamed the spill on a faulty blowout preventer.

What’s more, the Deepwater Horizon spill occurred on a rig owned by an industry leader, the U.S. subsidiary of BP, using top-of-the-line technology. And it happened in U.S. waters, subjecting the company to U.S. jurisdiction.

The U.S. forbids oil drilling within 125 miles along much of Florida’s Gulf Coast, as far as 235 miles at some points.

Florida leaders are resisting efforts to relax those restrictions.

The U.S. House of Representatives has approved an amendment to the Interior Appropriations bill keeping the restrictions in place through 2022 but a U.S. Senate bill has been introduced that would allow drilling as close as 50 miles off Florida’s Gulf Coast.

Cuban oil is believed to lie just 60 miles from Florida’s southern border.

Hunt said a few companies from outside the U.S. that specialize in oil drilling equipment have expressed interest in doing business with Cuba if doing so would not violate the U.S. embargo.

Obama has said he wants a vote in Congress to lift the embargo. Meantime, the new policies he set forth in January were meant to strip it down, Muse said.

“The president has not said lift some aspects of the embargo but not others,” attorney Muse said. “He has said lift it all. So if commerce does what he suggests, Obama wants commerce to license the needed equipment to the oil industry.”

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This sentiment is echoed by Dan Whittle, who directs marine and coastal conservation projects in Cuba with the New York-based environmental advocacy group the Environmental Defense Fund.

“The new rules give favorable review to certain kinds of exports including those in the environmental sector that benefit the U.S.,” Whittle said. “This would certainly be in the spirit of that. If not this, then my question would be what?”

Taking this view of the new Cuba policy might indeed exempt an entire oil rig from the embargo, said Jorge Piñon, director of the Latin America and Caribbean Energy Program at the University of Texas.

“An argument can made that you need every piece of its equipment to be top notch because if any one fails during drilling, there can be an accident,” Piñon said. “So make the whole rig exempt from the 10 percent rule.” Following the Deepwater Horizon disaster, Hunt helped spearhead a Caribbean wide agreement on dealing with oil spills, known as the Multi-Lateral Technical Operating Procedure.

Five nations with Caribbean shorelines — Mexico, the Bahamas, Jamaica, Cuba and the U.S. — spelled out how they’ll react when a spill extends beyond one nation’s territorial waters. This includes specific responsibilities, who will be contacted in each nation, and how visas will be cleared for vessels and personnel.

This procedure deals with reaction. The new “Safe Seas, Clean Seas” initiative aims to get ahead of any potential disaster.

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The Cuban government informed Hunt, he said, that it plans to drill two deep water wells by the fourth quarter of 2016 and already has two oil companies interested in leading the effort — Angola’s Sonangol and Venezuela’s PDVSA.

Galp Energia of Portugal also is considering drilling in Cuba, Hunt said.

Scarabeo 9 is under contract through July 2016 so it may be available for lease. Its Italian owner, Sapiem, could not be reached for comment.

Still, Piñon with the University of Texas said he doubts that Cuba would use an unsafe rig if Scarabeo 9 is unavailable.

“The Cuban tourism industry earns over $2 billion a year,” Piñon said. “Are they going to put that at risk to drill for oil that has yet to be found?”

By some estimates, 5 billion to 20 billion barrels of oil and 8 billion cubic feet of natural gas lie beneath Cuban waters. Yet four past explorations have come up dry.

“So that is your big question: Will someone want to risk the over $200 million it will cost to for an exploratory rig?” Piñon said. “I’m not sure someone will drill in Cuba in the next year considering there are better options right now.”
Mexico is one example, he said. He predicts drilling in Cuba is two to three years off.

Still, Piñon said, he favors environmental exemptions to the U.S. embargo.

Better to have the mechanism in place now, he said, than to scramble at the last moment.

“We don’t build fire stations expecting a fire to break out tomorrow,” he said.

Muse has been lobbying the Obama administration for years to pass an executive order on licensing oil drilling equipment for export to Cuba.

Former Florida Sen. Bob Graham, co-chairman of the National Commission on the BP Deepwater Horizon Oil Spill, told the Tribune last year he was pushing the president on the issue, as well.

The commission was charged with providing recommendations on how the U.S. can prevent and mitigate future oil disasters.

“You don’t want to be doing all of this,” Muse said, “when you already have oil gushing into the ocean.”

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