Oil industry executives are well known for applying detailed analysis to the economics of oil and gas production. Today that analysis suggests Cuba’s estimated 5 to 20 billion barrels of offshore oil reserves and 8 billion cubic feet of natural gas will remain like so many other things in Cuba: forbidden fruit.
After the tragic events surrounding BP’s Deep Horizon accident in the Gulf of Mexico in 2010, a small but promising cooperation emerged between Cuba and the US in the area of offshore drilling safety. The Safe Seas — Clean Seas symposium, to be held in Havana from October 18-21, is a continuation of the cooperation that began years ago. While the symposium will not address wider issues of investment in the production side of the equation, the agenda calls for multinational oil spill response protocols, blowout prevention technology and environmental preservation. One of the key symposium partners is CubaPetroleo (CUPET), the national oil company responsible for upstream and downstream operations in Cuba.
The safety cooperation initiative, organized under the United Nations in 2011, resulted in the signing of the Wider Caribbean Region Multilateral Technical Operating Procedures for Offshore Oil Pollution Response between Mexico, the Bahamas, Jamaica, the US and Cuba. The 2014 agreement provides protocols for dealing with an oil spill with an emphasis on time-sensitive approvals for deploying vessels and equipment.
According to Lee Hunt, a partner of Hunt Petty LP, the oil and gas consulting firm organizing the symposium, there are definitive signs of eagerness among Cuba’s oil and gas leaders to put aside political differences and instead cooperate in the area of safety.
Similarly, in the US, there are now special export rules that allow US companies to supply Cuba with critical, state-of-the-art blow out safety equipment and other resources without violating terms of US trade restrictions.
Despite its regional flavor, industry sources say the safety cooperation agreement’s intent was to address the real risk that Cuba’s deep offshore exploratory drilling activity, which began in 2012, could devastate Florida’s coast in the event of a spill. Some of Cuba’s reserves lie just 60 miles off Florida’s coast.
According to Jorge Piñon, Director of Latin America and Caribbean Program at the Center for International Energy and Environmental Policy at The University of Texas at Austin, the cooperation between US and Cuban oil industry in the area of safety is, “one of the bridges that allows better relations between the US and Cuba.”
Aside from the US embargo, three factors are negatively impacting Cuba’s near-term prospects to attract partners on the production side, according to Mr. Piñon. First, Cuba’s initial deep offshore drilling produced mostly dry holes – at an estimated cost of $500m to the foreign drillers. Presently, there are no offshore drilling operations. Second is the low price of oil. Mr. Piñon estimates that oil needs to be at $70-$75 a barrel for economic feasibility. Finally, competition with regional players, including Peru and Mexico, make Cuba’s relatively risky hydrocarbon development less desirable.
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