Cuba's Undersea Oil Could Help Thaw Trade With U.S.
Saturday, May 16, 2009
Deep in the Gulf of Mexico, an end to the 1962 U.S. trade embargo against Cuba may be lying untapped, buried under layers of rock, seawater and bitter relations.
Oil, up to 20 billion barrels of it, sits off Cuba's northwest coast in territorial waters, according to the Cuban government -- enough to turn the island into the Qatar of the Caribbean. At a minimum, estimates by the U.S. Geological Survey place Cuba's potential deep-water reserves at 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas, stores that would rank the island among the region's top producers.
Drilling operations by foreign companies in Cuban waters are still in the exploratory stage, and significant obstacles -- technological and political -- stand between a U.S.-Cuba rapprochement eased by oil. But as the Obama administration gestures toward improved relations with the Castro government, the national security, energy and economic benefits of Cuban crude may make it a powerful incentive for change.
Limited commercial ties between U.S. businesses and the island's communist government have been quietly expanding this decade as Cuban purchases of U.S. goods -- mostly food -- have increased from $7 million in 2001 to $718 million in 2008, according to census data.
Thawing relations could eventually open up U.S. investment in mining, agriculture, tourism and other sectors of Cuba's tattered economy. But the prospect of major offshore reserves that would be off-limits to U.S. companies and consumers has some Cuba experts arguing that 21st-century energy needs should prevail over 20th-century Cold War politics.
"The implications of this have the potential to be a sea change, literally and figuratively, for the Cubans," said Jonathan Benjamin-Alvarado, a political scientist at the University of Nebraska-Omaha who studies Cuba's energy sector.
At a House subcommittee hearing last month on U.S.-Cuba policy, former oil executive Jorge Piñón told lawmakers that the United States has a strategic interest in helping Cuba tap its potentially vast hydrocarbon stores and that U.S. companies should receive special permission to do so.
"American oil and oil equipment and service 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 political and economic embargo," said Piñón, a member of a Brookings Institution advisory group on Cuba policy reform.
Cuba has said it welcomes U.S. investment, but American companies remain largely silent on the issue, at least in public, bound by trade sanctions that were established under the Kennedy administration. When Cuban oil officials and U.S. companies attended a joint energy conference at an American-owned hotel in Mexico in 2006, the Bush administration forced the facility to expel the Cuban delegation, attempting to thwart any potential for partnership.
"Until trade barriers are removed, Chevron is unable to do business in Cuba," said Chevron spokesman Kurt Glaubitz. "Companies like us would have to see a change in U.S. policy before we evaluate whether there's interest."
Robert Dodge, a spokesman for the American Petroleum Institute, said his organization is not lobbying for access to Cuba, and Texas congressional representatives with ties to the oil industry said they are focused on opening U.S. territorial waters to drilling. But observers of U.S.-Cuba relations say American companies haven't been sitting on their hands and remain in conversations with Cuban counterparts.
At the 2006 Mexico energy conference, U.S. oil companies "all had plans to move forward as soon as the U.S. government gives them the go-ahead," said Benjamin-Alvarado, who attended the conference.