Thursday, May 25, 2006

Promising Oil in Cuban Waters

(Source Article: Norway and India hunt for oil in Cuba - Financial Times)

The proverbial carrot is being dangled in front of U.S. oil companies, and Castro is holding the stick.

An existing debate in Washington over the U.S. trade embargo with Cuba is almost certain to intensify from the recent agreement by Norway and India to join Spanish oil group Repsolin in exploring for oil, and potentially profiting during a time of high oil prices, in the Cuban waters of the Gulf of Mexico.

Drilling in the waters is expected to begin in about 18 months. While large quantities of oil would have to be present in order for costly drilling in deep-waters to be economically viable, a U.S. Geological survey has estimated that the North Cuba basin could contain anywhere from 4.6 billion to potentially 9+ billion barrels of oil.

The thought of energy-hungry China reaping the benefit of such quantities of oil in mere “spitting distance” from the U.S. mainland has already sparked an intense debate over an exception to the trade embargo that would allow U.S. companies to also explore and drill for oil in the Cuban waters—but to do so would require negotiations with the Castro government. Anti-Castro Cuban exiles in Florida, with a powerful lobby, remain diametrically opposed to such a thought, and thus a conflict is likely to ensue. (see Cuba OKs Oil Venture in Gulf - Yahoo!)

Cuban government officials invited U.S. exploration during a February meeting in Mexico: “…we are open for business as soon as the laws of their country permit,” said Juan Fleites, an executive of Cuba’s state oil company, CUPET.

In a time when soaring oil prices are detrimental to American consumers, should the American government compromise its long-standing objection to the Castro regime and do what’s good for business, and potentially the “right” thing to do?

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