Monday, July 24, 2006

Cuba is drilling for oil 60 miles off the coast of Florida with help from China, Canada and Spain even as Congress struggles to end years of deadlock over drilling for what could be a treasure trove of offshore oil and gas.

Republicans in Congress have tried repeatedly in the past decade to open up the outer continental shelf to exploration, and Florida’s waters hold some of the most promising prospects for major energy finds. Their efforts have been frustrated by opposition from Florida, California and environmental-minded legislators from both parties.

Florida’s powerful tourism and booming real estate industries fear that oil spills could cost them business. Lawmakers from the state are so adamantly opposed to drilling that they have bid to extend the national ban on drilling activity from 100 miles to as far as 250 miles offshore, encompassing the island of Cuba.

Cuba is exploring in its half of the 90-mile-wide Straits of Florida within the internationally recognized boundary as well as in deep-water areas of the Gulf of Mexico. The impoverished communist nation is eager to receive any economic boost that would come from a major oil find.

“They think there’s a lot of oil out there. We’ll see,” said Fadi Kabboul, a Venezuelan energy minister. He noted that the oil fields Cuba is plumbing do not respect national borders. Any oil Cuba finds and extracts could siphon off fuel that otherwise would be available to drillers off the Florida coast and oil-thirsty Americans.

Canadian companies Sherritt International Co. and Pebercan Inc. already are pumping more than 19,000 barrels of crude each day from the Santa Cruz, Puerto Escondido, Canasi and other offshore fields in the straits about 90 miles from Key West, and Spain’s Repsol oil company has announced the discovery of “quality oil” in deep-water areas of the same region, the National Ocean Industries Association said.

Cuba’s state oil company, Cubapetroleo, also has inked a deal with China’s Sinopec to explore for oil, and it is using Chinese-made drilling equipment to conduct the exploration.

That compounds the frustration for U.S. oil companies and other businesses that have lobbied to open up the estimated 45 billion barrels in oil reserves and 232 trillion cubic feet of gas reserves in banned drilling areas of the Gulf — enough to fuel millions of cars and heat millions of homes for decades.

U.S. companies, which have the best deep-water equipment, cannot participate in the Cuban drilling because of the 45-year economic embargo against Fidel Castro’s communist regime.

If oil is found in commercially viable quantities, Cuba could be transformed from an oil importer into an exporter, ending chronic energy shortages on the island and generating government revenue.

That prospect and the involvement of China and Venezuela in exploration activities have attracted the attention of the CIA and other national security agencies, even if congressional opposition to offshore drilling has not budged.

Sterling Burnett, a fellow at the National Center for Policy Analysis, a conservative think tank, said Cuba’s activities show that the quarter-century ban on offshore drilling is putting the U.S. at a strategic disadvantage at a time of increasingly scarce energy resources and record high oil and gas prices that are hampering economic growth and stoking inflation.

“Canada and even economically backward Cuba are moving forward with plans to drill in offshore areas that abut U.S. coastal waters,” he said. “Since pools of oil do not respect international boundaries, it is almost certainly true that Canada and Cuba will be accessing oil that could otherwise be developed by and for the benefit of Americans.”

More than half of the nation’s untapped offshore oil and gas reserves lie within the Gulf, much of it within Florida’s protected waters. In the latest attempt to exploit the reserves, the House last month passed a bill that would allow coastal states to decide whether to open the first 100 miles of their waters for exploration.

The bill allows states such as Florida and California to vote for a permanent moratorium on drilling but also includes a powerful enticement to allow exploration: half of the hundreds of billions of dollars in royalties and fees from drilling that otherwise would go to the federal government.

The bill’s authors are calculating that the public will support drilling more when people are able to share in the revenues. That is the case in Alaska, for example, where drilling faces little opposition because each resident receives a prorated check for thousands of dollars in oil royalties each year.

Although coastal states stand to benefit greatly from the revenue-sharing provision, the Office of Management and Budget said the drain on federal revenues would amount to hundreds of billions of dollars.

The White House particularly objected to extending the revenue-sharing provision to Louisiana, Texas, Mississippi and Alabama, which already allow drilling offshore, and said revenue should be shared only in new drilling areas.

A bill that the Senate is scheduled to debate this week is far narrower in an attempt to attract Democratic votes. It focuses on allowing drilling in a key area in the eastern Gulf thought to contain large reserves, while ensuring that Florida still enjoys a 125-mile no-drilling buffer zone.

The Senate bill’s more targeted revenue-sharing provision would authorize states that already allow drilling to start earning a one-third share of royalties in 2017. The provision was added to attract support from Sen. Mary L. Landrieu, Louisiana Democrat.

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