Summary
The U. S. Geological Service estimates that the Exclusive Economic Zone contains 4.6 billion barrels of oil and 9.8 billion cubic feet of natural gas. Cuba which estimates reserves at 20 billion barrels, began to sell concessions for exploration and development in the 70,000 square mile zone in 2001. The problem for the Cuban's now is that the primary partner in exploration, development and refining capacity upgrades is Petroleos de Venezuela (PDVSA), which has suffered from a serious reduction in oil revenues, as well as adverse effects from operational difficulties and government liquidity problems. So the real question is how does the embargo affect that development and who is poised to take immediate advantage?
Analysis
90 miles off the coast of Florida sits a largely untapped field of oil and natural gas. Most of those reserves are in Cuban territory, and not available to the United States. Under existing law U. S. based companies cannot explore, develop, provide drilling equipment, personnel or even investment.
Given the present state of the global and U. S. economies, demand for oil has diminished. The present administration and Congress, are committed to building renewable energy sources and developing the infrastructure necessary to distribute that energy. The Congress is opposed to the development of offshore drilling, citing environmental reasons. Yet, until alternative energy is readily available, a long way down the road, the economy will continue to run on oil.
When Cuba began selling concessions in 2001 other countries took notice and began to participate. These foreign oil companies include state and publicly traded firms such as PETROBRAS, STATOIL and China. Technically it is illegal for U. S. companies to sell equipment and supplies to these firms for use in the exploration of these fields.
By now it is obvious that the embargo while having a negative impact on the Cuban economy is a failure. Cuba has been readmitted to the OAS, and under Raul Castro has made numerous overtures to China, Venezuela for economic development. Economic development of this island nation should be recognized as a strategic necessity for the United States.
The present administration has publicly said that it would like to engage Cuba and has taken tentative steps to ease sanctions. So the signs are that the embargo may end.
However, the time frame seems to be several years in the future. For U. S. companies to participate in timely exploration, production and refining, it would have to end within the next year or so. This based on the time companies can begin to finance, equip and mobilize skilled workers to begin the process. The process of exploration, development, production and refining takes anywhere from 5 to 10 years.
This is an opportunity to make a dramatic foreign policy statement, while recognizing the strategic economic and security issues involved in keeping U. S. companies out of a vital sector of the global energy industry.
