U.S. oil industry eager for ties to Cuba
Equipment, services could be sold under looser trade rules
WASHINGTON — The thaw in relations between the United States and Cuba is creating potential openings for oil field service companies, equipment manufacturers and maritime firms, even though longstanding trade restrictions are likely to block energy companies from drilling in the island nation anytime soon.
President Barack Obama announced plans to normalize relations between the U.S. and Cuba last December, then followed that up by loosening trade and travel restrictions. Obama also called on Congress to lift the 55-yearold trade embargo, which blocks anything containing more than 10 percent U.S. parts from being sold to Communist Cuba.
Even without Congress’ consent, the administration has latitude to authorize exports and business dealings with Cuba. And under new rules released in January, the administration already said it would look favorably on applications to export items necessary for environmental protection.
That opens up a world of possibilities for oil field equipment, technology and services, ranging from purely protective gear such as skimmers that mopupoil spills
to devices that have a dual role both safeguarding the environment and assisting drilling.
“To the extent that oil technology has that dual use — you can use it to extract oil but you can also use it for safety functions and environmental functions to prevent spills — I think it qualifies,” said Robert Muse, a Washington-based lawyer specializing in Cuba policy and trade.
Such dual-use technology could include blowout preventers — devices used atop onshore and offshore wells as a last defense against surging oil and gas. It also could include lessobvious technology, such as the seismic research used to map geological features deep underground. While that knowledge can guide oil companies to potential discoveries, it also can keep them from penetrating risky terrain.
All of this should send a message to oil field service companies, said Lee Hunt, the Houston-based former head of the International Association of Drilling Contractors. “Cuba’s no longer this mysterious place where you cannot go.” ‘Safe Seas, Clean Seas’
Hunt is organizing a “Safe Seas, Clean Seas” conference in Havana in October that will bring together engineers, environmentalists and officials from the U.S., Cuba and Caribbean nations to discuss preventing oil spills, cleaning them up and new drilling trade opportunities.
Advocates of more U.S. oil business dealings in Cuba say it makes more than just good economic sense. The country already drills on land near its coast, and next year, Angola’s Sonangol is expected to launch exploratory drilling off the northern shoreline.
Cuba is eager to expand its own oil production, now limited to 50,000 barrels a day. To meet its energy needs, the country has been importing almost twice that daily from Venezuela.
Nearby waters could have the crude Cuba needs. In March, the U.S. Geologi- cal Survey estimated about 9.8 trillion cubic feet of undiscovered natural gas and 4.6 billion barrels of crude oil are lurking in the North Cuba Basin, with most of it less than 50 miles from Cuba’s western and northern coasts.
But a spill in the targeted waters could send oil washing onto southeast Florida beaches in three days. To protect marine and coastal ecosystems, coral reefs and other habitat, it’s essential that any offshore drilling ventures use top-notch technology and can swiftly access emergency equipment to rein in a runaway well, said Dan Whittle, director of the Cuba program for the Environmental Defense Fund.
“If they are going to drill, they might as well use the very best drilling equipment,” Whittle said.
Hunt said the planned drilling shows that “even without U.S. operators in play right now, there is a need for service companies and supplies in Cuba.” And, he asserted, it shouldn’t be limited to spill response and cleanup technology but should also include equipment on rigs that help safeguard drilling.
Although Whittle, Hunt and Muse have pushed the U.S. for an explicit policy authorizing the export of oil spill response equipment, companies can still pursue individual licenses under the new trade rules.
It’s not clear, however, whether anyone has actually tried. The Treasury Department’s Office of Foreign Assets Control, which reviews those requests to do business with Cuba, generally does not make denials public.
But Muse believes a persuasively drafted application for dual-use drilling technology and equipment will pass muster.
“I would encourage the oil industry. This is a new day,” he said. “Start with considering dual-use application equipment and think of actually supplying it to some of the third-party concessionaires in Cuba. Think about marketing directly to them with the understanding you’re going to get an export license.” Republican issue
Muse thinks there’s a good political reason the Obama administration will sign off on oil industry exports to Cuba.
Critics in Congress and some Republican presidential contenders have said they want to reverse course on Cuba. Given the deep GOP roots of many in the oil industry, Muse said, Obama could make it much harder for his successors to undo his work by boosting the sector’s ties with Cuba.