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Tuesday, December 13, 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 early 2012, and several other companies are considering such 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.

In the aftermath of the Deepwater Horizon oil spill, 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 preparedness and coordination in the event of an oil spill. Dealing with these challenges is made more difficult because of the long-standing 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.

The Obama Administration has been making efforts to prepare for a potential oil spill in Cuban waters that could affect the United States. This has included: updating oil spill area contingency plans covering Florida and developing a broader offshore drilling response plan; engaging with Repsol over its oil spill response plans (including plans to inspect the oil rig that Repsol will use); and licensing U.S. companies to provide personnel and export equipment needed for oil spill preparedness and response. 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 for oil spill preparedness and response. Some have also called for direct U.S.-Cuban government cooperation to minimize potential oil spill damage, looking at U.S. cooperation with Mexico as a potential model as well as information sharing and cooperation through multilateral channels under the auspices of the International Maritime Organization. In contrast, some policy groups call for the United States to focus on preventing Cuba from engaging in offshore oil exploration altogether.

In the 112th Congress, five legislative initiatives have been introduced taking varying approaches toward Cuba’s offshore oil development, and there have been two oversight hearings. H.R. 372 would authorize the Secretary of the 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, among its provisions, would require the development of oil spill response plans for nondomestic oil spills in the Gulf of Mexico, including recommendations for a 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. S. 1836 and H.R. 3393 would provide that foreign offshore oil developers would be liable for damages from oil spills that enter U.S. waters. For additional information on Cuba, see CRS Report R41617, Cuba: Issues for the 112th Congress.

Date of Report: November 28, 2011
Number of Pages: 24
Order Number: R41522
Price: $29.95

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