Drilling advances

Vol. 232 No. 11

On Cuba drilling plans, US takes NIMBYism to a whole new level

It is an anomaly that has afflicted mankind for ages. Clearly, something in our genes hotwires us to rail against anything that we see even remotely infringing upon our inner sanctums, no matter how essential the product of that perceived disruption is to sustaining our way of life. It’s not that hard a stretch to imagine some prehistoric fellow protesting a club maker whose primeval shop interrupts part of his view of the valley.

As operators in much of the Marcellus shale and offshore California can well attest, this “not-in-my-backyard,” or NIMBY, peculiarity is as acute as ever. Now, however, NIMBYism has reached an entirely new dimension as US politicos and regulators attempt to tell a sovereign nation, albeit one with a fabulously checkered record as a responsible member of the world community, how to manage its own natural resources.

I refer to Cuba, where operator Repsol-YPF intends to drill a deepwater exploration well some 60 miles (97 km) off the Florida Keys. The Spanish operator will spud the well in 5,500 ft (1,676 m) of water in the Cuban portion of the Florida Straits before the end of this year and, if successful, more will follow, Repsol spokesman Kristian Rix told The Wall Street Journal in mid-October.

As far back as 2004, the US Geological Survey (USGS) estimated the North Cuba basin to hold a mean case of 4.6 billion bbl of oil and more than 9.8 Tcf of undiscovered natural gas. Cuba’s state oil company Cubapetroleo (Cupet) predicts the reserves to be four or five times larger than the USGS estimate—a forecast that, given Cuba’s history, should be taken with a grain of salt.

Repsol plans to drill the wildcat within the 43,000-sq-mi (112,000-sq-km) exclusive economic zone allotted to Cuba in a 1997 maritime boundary agreement with the US and Mexico. The operator’s intention to explore the deep waters of the North Cuba basin sent shivers throughout the US, and the NIMBies immediately expressed outrage that the Caribbean island would dare drill a well so close to their pristine South Florida beaches.

The US, however, has little sway over Cuba, where it has maintained an all-out embargo since 1963 that prohibits any citizen or company from visiting, let alone doing business with, the tiny nation. With no other alternative, officials have turned their attention to Repsol, trying to convince the operator that it may not be in its best interests to support the rogue nation by helping it potentially achieve oil wealth. While the current administration has not officially thrown the punch, it is quick to remind Repsol of its considerable holdings in US territory, including deepwater acreage. Repsol was the winning bidder on 16 tracks in the Central Gulf of Mexico Lease Sale 208 in 2009, and also holds acreage on the Alaskan North Slope.

The operator agreed to the point that not only will it allow inspectors from the US Bureau of Safety and Environmental Enforcement (BSEE) to give the Chinese-made Scarabeo 9 semisubmersible a once-over before it arrives in Cuban waters, but it also told The Wall Street Journal that it is willing to share detailed exploration and operational plans—a standard procedure for operators drilling in US waters.

Even those concessions were not enough to pacify some US congressional members. Naturally, most of the outrage is coming from Florida’s delegation. The Naples Daily News reported that Rep. Vern Buchanan of Sarasota introduced a bill earlier this year that would give the US Interior Department power to reject oil and gas leases within US waters to any company doing business with an embargoed nation—such as Cuba. Should the US decide to go that route, it might also have to pull the plug on international operators like Statoil and Petrobras, who hold a considerable number of blocks in US waters and also are said to be eyeing deepwater exploration off Cuba.

Floridians are understandably skittish about Cuba drilling deepwater exploratory wells so close to their coastline. While the island nation guards information like the Crown Jewels, it is known that only one or two deepwater wells have been drilled in its waters to date. Now, with the impoverished island publicly seeking to capitalize on what have been described as world-class potential resources, there are fears that the relative lack of geological and pressure data could result in a spill that would threaten the Florida coast. After all, memories of Macondo remain very vivid, as do those of the Ixtoc-1 exploration well that blew out in Mexico’s Bay of Campeche and sent oil all the way to the Texas coast, even though the latter occurred more than 32 years ago.

US companies and consortia have the know-how and resources to deal with a potential well containment effort and spill cleanup offshore Cuba, but US law prohibits them from bringing those resources into Cuban territory. An unnamed US official told The Wall Street Journal that the government is reviewing applications from companies to assist in the event of a blowout. However, some argue that forcing these organizations to apply for working permits would allow any spill to reach halfway up the US East Coast by the time they were ready to mobilize equipment and personnel.

As US lawmakers struggle with severe budgetary constraints, one has to wonder if there isn’t a little bit of jealously involved here. After all, the US has made much of the Eastern Gulf of Mexico and all of the East Coast off limits to drillers, which also removes any potential for royalty payments or lease bonuses. Now, only a few miles off its shores, another country is looking at a potential bonanza. Perhaps the uproar over Cuba’s deepwater well isn’t driven solely by fear of what could happen if it fails (i.e., in a blowout), but also by fear of its success.