U.S.-Cuba oil drill deals ahead? Maybe

Bill Loveless, Special for USA TODAY

http://www.usatoday.com/story/money/columnist/2015/11/02/us-cuba-oil-drilling-deals-possible/75041764/

November 2, 2015

Given the U.S. trade embargo against Cuba, can American companies participate in that country’s plans to resume drilling for offshore oil?

That question came up frequently at a recent conference in Havana of U.S. and Cuban government and business interests, and for some participating in the event, the answer is: Yes, probably.

Among them was Robert Muse, a Washington attorney, who cited executive actions taken by the Obama administration since it began to normalize relations with Cuba last year, and suggested that more moves may be in the works.

“The president of the United States could give Hilton a license tomorrow to build a hotel (in Cuba). He could lift all the restrictions on the importation of Cuban goods of all types, like rum, cigars. He could license any imaginable export from the United States to Cuba. The president can do all that.”

Robert Muse, attorney specializing in legalities of U.S.-Cuba trade

“There’s tremendous presidential discretion under the embargo,” Muse, a specialist in the legalities of U.S.-Cuba trade, said in an interview after addressing the group. “The president of the United States could give Hilton a license tomorrow to build a hotel (in Cuba). He could lift all the restrictions on the importation of Cuban goods of all types, like rum, cigars. He could license any imaginable export from the United States to Cuba. The president can do all that.”

When it comes to oil development in Cuba, a critical consideration for companies is a policy announced in January by the U.S. Department of Commerce that indicates likely approval of requests to send U.S. technology or services to Cuba to protect the two countries’ waters and coastlines.

That policy, among several initiatives by the Obama administration to ease the impact of the embargo, reflects the mutual interests of the U.S. and Cuba to protect the 100 or so miles of water between the two countries. But to Muse and others at the conference, called “Safe Seas, Clean Seas,” the Commerce action also appears to be an open invitation for U.S. companies to seek approval for all sorts of activities in Cuba’s oil sector, including drilling for oil.

“It’s almost impossible to meet the new mandate of protecting the marine environment without letting U.S. companies supply the full range of equipment,” Muse said. “Skimmers are a given; they’re going to license those. But I think a compelling argument can be made that if there is a U.S.-built oil rig (available), wouldn’t it make more sense for that U.S. rig to be drilling” in Cuba?

“Right now, Cuba is talking to Angola, Malaysia, Venezuela, Russia” about offshore oil drilling, he added. “What’s the safest and cleanest way to explore for and extract oil? It’s with U.S. equipment from beginning to end.”

In addition to the January announcement by Commerce, the administration has taken other steps to facilitate trade between the U.S. and Cuba, despite the continuance of the embargo, which dates back to 1960 and can only be rescinded by Congress. That’s not likely to happen any time soon, given opposition from Republican lawmakers.

“U.S. companies are generally not aware of that,” Lee Hunt, the former president of the International Association of Drilling Contractors, who organized the Havana conference, said of the changes in U.S. policy regarding trade with Cuba. “So, one of our purposes will be to educate U.S. companies about these opportunities.”

That said, Cuba’s oil resources are not much of an attraction now for companies in the U.S. and other countries, with oil prices in a year-long slump that shows no sign of ending soon. Nevertheless, Cuba’s government, now heavily reliant on an unstable Venezuela for oil, aims to resume drilling late next year in waters about 50 miles from the Florida coast, despite failed attempts in the past.

The U.S. Geological Survey estimated in 2004 that 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas may be recoverable off Cuba’s north coast.

“The first effect I would see is oil service companies having the opportunity to offer their services here,” Roberto Suárez, the deputy general director of Cupet, Cuba’s state-owned oil company, said during a tour of onshore oil installations in Varadero. “Also, suppliers of technology. We buy $700 million in equipment, technology, pumps and other things that we need.”

Whenever the oil opportunities arise, U.S. companies should be ready to take advantage of them by applying for licenses in Washington, Muse said.

“They want to promote U.S. business with Cuba,” he said of the Obama administration. “This is the first time since John Kennedy was president that there’s been a policy of active encouragement for the U.S. business sector to explore opportunities in Cuba. So, take the administration at its word.”

Bill Loveless — @bill_loveless on Twitter — is a veteran energy journalist and television commentator in Washington. He is a former host of the TV program Platts Energy Week.