Cuba oil boom may complicate U.S. embargo

Cuba oil boom may complicate U.S. embargo

As Cuba's oil potential grows, a Canadian company has disclosed plans to export the island's petroleum and set up a possible clash with the U.S. trade embargo.

BY JANE BUSSEY
jbussey@MiamiHerald.com

The discovery of oil in the Florida Straits and near the Cuban shoreline -- potentially billions of barrels of reserves -- has boosted Cuba's energy prospects and drawn the attention of the U.S. oil industry.

Now, a small Canadian energy company, Sherritt International, says it plans to export Cuban oil for the first time -- a move that could put the crude on a collision course with the U.S. trade embargo against Cuba.

Details are few, but questions about the move go to the heart of the embargo: Where will the oil be refined? And how could Sherritt International or subsequent handlers keep the Cuban crude out of fuel being exported to the United States?

The issues rise as the oil and gas industry turns its gaze to the prospect of oil drilling off Cuba -- currently forbidden fruit for U.S. companies.

Sherritt International, in a report about its record 2006 earnings, said that in 2007 it ``plans to export a portion of its Cuban production as a consequence of anticipated production growth and limited demand for domestic heavy oil.''

Sherritt, which had revenue of about $1 billion U.S. in 2006, produces an estimated 68,000 barrels of crude oil in Cuba. Michael Minnes, company spokesman, said plans for exporting the oil are still under discussion.

''We respect U.S. law,'' Minnes said from Sherritt's Toronto headquarters. ``We have no intention of selling it into a situation that would affect the embargo.''

Minnes said demand in Cuba for the oil has dropped because the island is increasingly using diesel generators for electricity production instead of burning crude.

Sherritt doesn't currently have offshore wells; instead, its onshore equipment drills horizontally into petroleum reservoirs located under the water.

The Sherritt International plans drew fire from Cuban-American U.S. Rep. Lincoln Díaz-Balart, R-Miami.

'Sherritt is on the `short list' of companies that will have very serious civil as well as criminal legal problems in Cuba when the Cuban people recover their sovereignty and have a government that fights for their rights,'' Díaz-Balart said.

''Their oil investments will involve but a small part of their legal problems once the rule of law returns to Cuba,'' the lawmaker said in a statement e-mailed to The Miami Herald.

There was no immediate response to an e-mail and a phone call to the Cuban Interests Section in Washington.

STICKY PROBLEM

Oil expert Jorge R. Piñon said Sherritt or any other oil company would face the challenge of how to commercialize crude oil outside of Cuba without breaking the U.S. embargo, in place since the early 1960s.

''Inevitably wherever this crude oil is processed in the Caribbean region, there is a high probability that its byproducts will find their way into the U.S. markets,'' said Piñon, a former oil executive who is now a senior researcher at the Institute for Cuban and Cuban-American Affairs at the University of Miami.

Sherritt International, in a joint venture with the Cuban government, has been drilling for oil in Cuba for more than a decade, gradually increasing production to the point that domestic production provides almost half Cuba's petroleum needs. Venezuelan refined products make up the rest.

But what has tantalized the oil industry was a report that Spanish energy company Repsol-YPF struck offshore oil in 2005 -- even though it wasn't a commercially viable well. In 2005, a U.S. Geological Survey report estimated Cuba's potential petroleum reserves could run some 4.6 billion barrels and natural gas reserves could total trillions of cubic feet.

EXPLORATORY DRILLING

''This would make Cuba a major oil player in the region,'' Piñon said.

With European, Asian and South American firms gearing up for more exploratory drilling around Cuba, U.S. oil companies and equipment and service suppliers are looking longingly at the potential bonanza.

U.S. OIL FIRMS OUT

The U.S. trade embargo bans American companies from doing business in Cuba, with exceptions for food and medicine, and the Bush administration has been increasingly aggressive about enforcing it.

''U.S. policy toward Cuba is to encourage a democratic, market-oriented transition,'' said Eric Watnik, State Department spokesman. The Treasury Department's Office of Foreign Assets Control has oversight over enforcing the embargo.

Last year, Sen. Larry Craig, R-Idaho, and Rep. Jeff Flake, an Arizona Republican, both critics of the embargo, introduced legislation to broaden the exemptions to allow the oil and gas industry to bid on Cuban contracts. But that effort went nowhere.

Legislators are currently discussing what form the bill should take to be reintroduced in the new Democratic-controlled Congress.

The Cubans should not worry ;there will be pretty soon a new generation of politicians in the United States.It is time to revoke this embargo.It is time for the americans to comprehend each country has its history ,its culture ; let the people themeselves see the benefits of democracy after they experienced other forms of government of their choices.They deal with china ;Putin and Georges Bush are friends,why then the United States and Cuba can not reconcile their differences?This hypocirsy is the cause of this rebellion in latin america against the foreign policy of the United States.Whereas the U.S.government is trading billions of dollars with communist China, they impose an embargo on Cuba because of its government.Does that make any sense?

The other day I was watching some pictures of Cuba on the forum of the" petit bourgeois "showing how Cuba is dirty, and the buildings are in bad shape.I could show similar pictures of harlem , of Bronx, of Brooklyn of Jamaica in Queens.,liberty citi in Miami. Watts in Los Angeles.,in Philadelphia , in New Orleans,in Baltimore.etc.What don't they talk about the old folks who can not eat because of the price of health care and medecines.what about the crime rate in those cities where children are not safe to play in the street anymore.what about these young people because of the burden of their student loans can not leave their parents'home because they can not afford even to rent a decent apartment in the city where they live.There is no such thing as a perfect political sysmtem in this world. let the people choose the system that is appropriate an convenient for them.If democracy is appropriate in the United sates that does not mean that it can be exported in other countries where the elite is composed of people who want to maintain the masses in slavery as in haiti.