Wednesday, October 19, 2011

Could Cuba become the next new market for Lafayette deepwater technology?  By Cherry Fisher May

With the first-ever Russian delegation in attendance, this year’s LAGCOE guest roster will have a uniquely impressive international flavor. That’s due in large part to the hard work of the LAGCOE board but also because top execs at some global companies, including Russia’s TNK-BP, spent part of their careers here. They know the value of LAGCOE and want their decision-making engineers to be at the show. Is it possible that a Cuban delegation could be part of the mix at the next one, two years hence?

The world is watching as Cuba’s first deepwater drilling platform eases through Gulf waters, destination 20 miles north of Havana — or about 60 miles from the Florida coast. The rig is a multinational project: owned by an Italian oil service group, constructed by a Chinese firm using a Norwegian design and funded by a consortium led by the Spanish energy company Repsol. The half-a-century old U.S. trade embargo limits American involvement in any Cuban enterprise to a maximum of 10 percent, so rig construction and future operations — including disaster response — are off-limits to essentially all domestic companies. The blowout preventer, made by Cameron International and reportedly a much advanced design since Deepwater Horizon, is the biggest U.S. piece of the project.

The U.S. Geological Survey indicates plentiful natural gas and about 5 billion barrels of oil in the Cuban field. Cuban authorities predict four times that amount, which would position the island as a mid-size energy exporter in the region. All agree that the exploration will require drilling in excess of 5,500 foot water depths, far deeper than the BP well that blew out in the Gulf last summer. “The fact that Cuba is about to drill six wells in the next two years, some of them very deep, deeper than Macondo in places we wouldn’t allow it if it were in our waters … you better believe that the United States has an important interest in that,” says William Reilly, co-chair of the presidential commission that investigated the BP spill.

Both the Norwegian design firm and the Chinese shipyard that collaborated on the rig construction are respected firms with good track records for safety. But with exploration about to begin so close to Florida and the Gulf Stream, there are concerns about risk. Reilly, who was in Havana last month along with other oil experts, is urging the Obama administration to cooperate with the Castro government on a joint-response plan in the event of an emergency; in such a case, analysts say oil could reach the Florida Keys in three days and that the Gulf Stream would carry it northward along the East Coast. Without U.S. resources, response teams would be a week away.

As LAGCOE commences, the Senate Energy and Natural Resources Committee is set to begin hearings on our readiness to respond to just such an emergency in international waters. The focus is on The Bay of Campeche, but the Cuba issue could come up. Staffers in Sen. Mary Landrieu’s office say that there are “common sense environmentalists” who accept that offshore exploration in Cuban waters is inevitable and that U.S. resources should be available. “That is starting to resonate with a lot of people,” a source says.

For decades, wary of the power of the predominantly anti-Castro delegation in south Florida, one U.S. administration after another has refused to end the Cuban embargo. Meanwhile, investors and suppliers based elsewhere have made millions providing agricultural products, developing tourism and now energy in the island country. Should the embargo be lifted, it could mean a new source of energy for U.S. consumers only 60 miles away, more jobs for Americans all along The Energy Coast and in agricultural enterprises across the country. U.S. exploration companies, majors and large independents, could invest there, along with U.S. based companies that comprise and supply the hospitality industry.

Could it be that environmental concerns over deepwater drilling provide the tipping point — or at least might split — political forces in South Florida, and that a coalition among states with the combined interests of energy, agriculture, tourism and environmental expertise could prevail? It certainly won’t happen in the upcoming election year but maybe — just maybe — it could by the next LAGCOE.

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