Wednesday, May 18, 2011

Cuban oil rig set to cause waves in Washington

Cuban oil rig set to cause waves in Washington
By Daniel Wallis – Tue May 17, 11:54 pm ET

LA JOLLA, Calif. , May 17 (Reuters) – The arrival of a unique oil rig
off communist Cuba is set to cause waves in Washington, raising
questions about U.S. drilling permits and the response to any disaster,
a conference heard on Tuesday.

Spanish giant Repsol YPF is due to bring the Chinese-built Scarabeo 9
rig to the Caribbean island later this year to drill at least one well
in partnership with Norway's Statoil and a unit of India's ONGC.

"I think it's going to have a much bigger impact on U.S. domestic policy
than it is on Cuba," said Jorge Pinon, visiting research fellow with
Florida International University Latin American and Caribbean Center's
Cuban Research Institute.

The main reason is that Repsol plans to use the high-tech
semi-submersible Scarabeo 9 for a deepwater drilling bid in Cuba's Gulf
of Mexico zone, parts of which are within 50 miles of the Florida coast.

That puts the planned drill site close to areas where the Obama
administration blocked U.S. drilling in the eastern Gulf of Mexico after
BP's massive Deepwater Horizon oil spill last year.

"A lot of people are going to be knocking on doors in Washington, saying
'How come the Cubans are drilling and we're not allowed to drill in the
eastern Gulf?'," Pinon told a Latin American energy conference in La
Jolla, California.


The Scarabeo 9 is unique because Repsol had to find an oil rig that met
the terms of the 49-year-old U.S. embargo on Cuba, which limits the
amount of U.S. technology that can be used in equipment used there. The
embargo also prevents U.S. companies from operating on the island.

Pinon said the $750 million rig, which can drill in 12,000 feet of
water, was due to leave Singapore next month and should arrive in Cuba
in September or October.

He said the only U.S.-made part on the Scarabeo 9 was the blow out
preventer -- one of the pieces of equipment that failed during the
Deepwater Horizon disaster.

And that raises the other issue likely to make waves when the rig, owned
by Italian service company Saipem and being prepared in Singapore,
arrives off Cuba: what happens if there is a similar accident to the one
off Louisiana?

"The U.S. embargo means Repsol can't pick up the phone to Washington,"
Pinon said. "Any equipment to help in a problem would have to come from
the UK or Norway or somewhere else."

He said the U.S. government should formulate a "One Gulf" strategy with
the international oil companies working in Cuba, as it is trying to do
with Mexico, so that in the case of any emergency they could turn to the
United States for help.

The U.S. government has said it would let U.S. companies that handle
accidental oil spills operate in Cuban waters if the need arose. Pinon
said that should be formalised.

Repsol drilled an offshore well in Cuba in 2004 and said it found oil,
but described it as "non-commercial."

After drilling at least one well, Repsol is due to pass the Scarabeo 9
to Malaysia's state oil firm Petronas. Venezuela's PDVSA may also be in
line to get the rig for its Cuban blocks.

The oil industry is watching the Repsol project very closely and if it
finds significant reserves, more companies are likely to want to explore
in Cuban waters.

Cuba has said it may have 20 billion barrels of oil offshore, although
the U.S. Geological Survey has estimated 5 billion barrels.

(Editing by Ron Popeski)

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