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Monday, August 1, 2011

Cuba’s Offshore Oil Development: Background and U.S. Policy Considerations

Neelesh Nerurkar
Specialist in Energy Policy

Mark P. Sullivan
Specialist in Latin American Affairs

Cuba is moving toward development of its offshore oil resources. While the country has proven oil reserves of just 0.1 billion barrels, the U.S. Geological Survey estimates that offshore reserves in the North Cuba Basin could contain an additional 4.6 billion barrels of undiscovered technically recoverable crude oil. The Spanish oil company Repsol, in a consortium with Norway’s Statoil and India’s Oil and Natural Gas Corporation, is expected to begin offshore exploratory drilling in late 2011, and a number of other companies are considering exploratory drilling. At present, Cuba has six offshore projects with foreign oil companies. If oil is found, some experts estimate that it would take at least three to five years before production would begin. While it is unclear whether offshore oil production could result in Cuba becoming a net oil exporter, it could reduce Cuba’s current dependence on Venezuela for oil supplies.

In the aftermath of the Deepwater Horizon oil spill in the Gulf of Mexico, some Members of Congress and others have expressed concern about Cuba’s development of its deepwater petroleum reserves so close to the United States. They are concerned about oil spill risks and about the status of disaster preparedness and coordination with the United States in the event of an oil spill. Dealing with these challenges is made more difficult because of the longstanding poor state of relations between Cuba and the United States. If an oil spill did occur in the waters northwest of Cuba, currents in the Florida Straits could carry the oil to U.S. waters and coastal areas in Florida, although a number of factors would determine the potential environmental impact. If significant amounts of oil did reach U.S. waters, marine and coastal resources in southern Florida could be at risk.

With regard to disaster response coordination, the United States and Cuba are not parties to a bilateral agreement on oil spills. While U.S. oil spill mitigation companies can be licensed by the Treasury and Commerce Departments to provide support and equipment in the event of an oil spill, some energy and policy analysts have called for the Administration to ease regulatory restrictions on the transfer of U.S. equipment and personnel to Cuba that would be needed to combat a spill. Some have also called for more formal U.S.-Cuban government cooperation and planning to minimize potential damage from an oil spill. Similar U.S. cooperation with Mexico could be a potential model for U.S.-Cuban cooperation, while two multilateral agreements on oil spills under the auspices of the International Maritime Organization also could provide a mechanism for some U.S.-Cuban engagement on oil pollution preparedness and response.

To date in the 112
th Congress, three legislative initiatives have been introduced taking different approaches toward Cuba’s offshore oil development. H.R. 372 would authorize the Secretary of Interior to deny oil leases and permits to those companies that engage in activities with the government of any foreign country subject to any U.S. government sanction or embargo. S. 405 would require companies conducting oil operations off the coast of Cuba to submit an oil response plan for their Cuba operations if they wanted to lease drilling rights in the United States. The bill would also require the Secretary of the Interior to begin efforts toward the development and implementation of oil spill response plans for nondomestic oil spills in the Gulf of Mexico, including recommendations on joint contingency plan with Mexico, Cuba, and the Bahamas. H.R. 2047 would impose visa restrictions on foreign nationals and economic sanctions on companies that help facilitate the development of Cuba’s offshore petroleum resources. For additional information on Cuba, see CRS Report R41617, Cuba: Issues for the 112th Congress.

Date of Report: July 21, 2011
Number of Pages: 21
Order Number: R41522
Price: $29.95

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