http://www.sun-sentinel.com/fl-cuban-oil-drilling-retreat-20130414,0,5594782.story
Threat to Florida’s environment reduced as drillers look elsewhere
By William E. Gibson, Washington Bureau
9:20 p.m. EDT, April 14, 2013
WASHINGTON – After spending nearly $700 million during a decade, energy companies from around the world have all but abandoned their search for oil in deep waters off the north coast of Cuba near Florida, a blow to the Castro regime but a relief to environmentalists worried about a major oil spill.
Decisions by Spain-based Repsol and other companies to drill elsewhere greatly reduce the chances that a giant slick along the Cuban coast would ride ocean currents to South Florida, threatening its beaches, inlets, mangroves, reefs and multibillion-dollar tourism industry.
The Coast Guard remains prepared to contain, skim, burn or disperse a potential slick. And Cuban officials still yearn for a lucrative strike that would prop up its economy. A Russian company, Zarubezhneft, is drilling an exploratory well in shallower waters hugging the Cuban shoreline south of the Bahamas.
But though some oil has been found offshore, exploratory drilling in deep waters near currents that rush toward Florida has failed to reveal big deposits that would be commercially viable to extract, discouraging companies from pouring more money into the search.
“Those companies are saying, ‘We cannot spend any more capital on this high-risk exploration. We’d rather go to Brazil; we’d rather go to Angola; we’d rather go to other places in the world where the technological and geological challenges are less,'” said Jorge Piñon, an oil-industry analyst at the University of Texas who consults with U.S. and Cuban officials as well as energy companies.
“I don’t foresee any time in the future exploration in Cuba’s deep-water north coast. It is, for all practical purposes, over.”
Despite these frustrations, Cuba’s need for oil wealth and energy independence has only intensified.
Venezuela – which holds a presidential election Sunday – may quit sending $3.5 billion worth of oil to Cuba each year under a barter arrangement initiated by the late Venezuelan President Hugo Chávez, an ally of Fidel and Raúl Castro.
Venezuela has been sending oil to Cuba at favorable prices, with part of the cost paid through low-interest loans and the rest offset by services from Cuban doctors, teachers and advisers – a sweet deal for the Castro regime that meets the island’s energy needs and fuels its struggling economy.
But Venezuelan opposition leader Henrique Capriles, a presidential candidate, has told voters that if he is elected “not another drop of oil will go toward financing the government of the Castros.” And even if Capriles loses to acting President Nicolas Maduro, Venezuela may be unable to sustain its generosity.
“How much longer can Venezuela provide billions of dollars in aid and petroleum?” said U.S. Rep. Kathy Castor, D-Tampa, who met with energy officials in Havana earlier this month. “They [Cuban officials] know that is staring them in the face.
“They were upfront that they have not been successful to date,” she said. “But they do have other foreign investors – the Russians, the Brazilians, Angola – and they intend to proceed.”
Castor and other Floridians fear the consequences of a potential offshore oil spill, especially if a giant slick gets caught in ocean currents that feed into the powerful Gulf Stream, which could drag it north along the Florida coast and to the Carolinas.
Florida leaders for years have fended off oil drilling within 125 miles of Florida’s Gulf Coast for fear a spill would damage the environment and the state’s $65 billion tourism industry.
Those fears were heightened when the Deepwater Horizon spill in 2010 spewed 210 million gallons of oil into the Gulf, ruining that summer’s tourist and fishing season along the Florida Panhandle and polluting coastal waters in ways that are still being measured.
In the aftermath, drilling north of Cuba just 70 miles from Florida set off new alarms and prompted the Coast Guard to devise contingency plans to fend off a potential slick.
The Coast Guard today is breathing a little easier but remains on guard.
“The ocean currents [near the Russian drilling site] are much more favorable in terms of a U.S. landing of a potential oil spill, but clearly there’s still risk,” said Coast Guard Capt. John Slaughter, who oversees oil-spill response plans in South Florida. “Even if the currents don’t bring it here, you still may have strong winds from the east pushing the oil closer to our shores.
“Economically for the state of Florida, if [a spill] were to happen, even if nothing reaches the shore, people are going to get agitated. ‘Should I still come to Florida on vacation if there’s an oil spill in the Florida Straits?’ We would be very aggressive to ensure that nothing happens.”
Repsol, a Spanish company, had been looking for oil off the shores of Cuba for more than a decade, hoping for a big strike that could generate billions of dollars of profit. The company brought a gigantic self-propelled floating rig – the Scarabeo 9 – all the way from Singapore to drill an exploratory well in ultradeep waters of more than 5,000 feet north of Havana in January 2012.
The well produced signs of oil. But by May 2012, the company concluded it wasn’t enough to justify the cost and difficulty of extraction through a complex and porous underwater rock structure. Now Repsol is closing its Cuban offices and moving elsewhere.
“We have taken a decision not to carry out any further exploration in Cuba after the last well we did in 2012,” said Repsol spokesman Kristian Rix. He would not elaborate.
Petronas, a Malaysian company, and PDVSA of Venezuela have dug exploratory wells at other deep-water sites off the Cuban coast during the past year and came to the same conclusion.
The Russian drilling still underway is in shallower waters – about 1,200 feet – along the Cuban coast near Cayo Coco, farther from Florida than the deep-water sites and farther from the Gulf Stream.
“Arguably it’s in a more environmentally sensitive area along the Cuban coastline,” said Daniel Whittle, Cuba program director for the Environmental Defense Fund. “But from the U.S. point of view, it poses less danger.”
Piñon, who estimates that energy companies have spent a total of nearly $700 million during a decade exploring deep-water sites, predicted that other companies with less capital will be discouraged from making further attempts.
“This is a high-risk business. Folks in the street rarely hear about all the dry holes. It’s nothing out of the ordinary,” he said. “Everyone had high expectations because there was supposed to be oil off the north coast of Cuba, and look what happened: nothing.”
Special thanks to Richard Charter.