Florida Sees New Threat to Its Beaches

Florida Sees New Threat to Its Beaches
Deepwater Drilling Project in Cuban Waters Set to Launch Next Year Could
Kick Off a Spate of Exploration in the Region
By RUSSELL GOLD
[CUBAOIL] Reuters

A Norwegian tanker approaching Havana last month. Several global oil
companies have signed leases to explore in Cuban waters, where the U.S.
Geological Survey has said there could be substantial stores of oil.

Florida has long fought to prevent oil drilling anywhere near its white
sandy beaches. But as the state continues to deal with oil from the Gulf
of Mexico spill washing up on its shores, it faces a new threat:
deepwater drilling in nearby Cuban waters.

Maria Ritter, a spokeswoman for Spanish oil company Repsol YPF SA, said
it plans to drill off Cuba, about 60 miles south of Key West, Fla.,
early next year. If successful, this would likely kick off a spate of
exploration. Only one deepwater well has been drilled in Cuban waters,
by Repsol in 2004. The effort found oil but not enough to justify
commercial development.

Since then, the U.S. Geological Survey has said there could be a
substantial amount of untapped oil off the Cuban coast, whetting the
appetite of several global oil companies that have signed exploration
leases.

U.S. companies won't participate because of a longstanding trade embargo
against Cuba. Repsol plans to use a floating drilling rig being
refurbished in a Chinese shipyard, similar to the Deepwater Horizon rig
leased by BP PLC that caught fire and sank in the Gulf of Mexico in
April. Almost all parts and components in the rig to be used by Repsol
are from non-U.S. companies.

The Obama administration has sought a six-month ban on deepwater
drilling in U.S. waters to reassess risks and establish new safety
procedures if necessary. But any new rules wouldn't reach Repsol's
project in Cuban waters.

A spill there, even one significantly smaller than the continuing BP
spill, could turn into an economic and environmental nightmare for
Florida. Some oceanographers say the oil would likely be carried up
Florida's Atlantic Coast, the heart of its tourism industry.

"We have one of the world's largest coral reefs and a protected marine
sanctuary there," said Dan McLaughlin, a spokesman for Sen. Bill Nelson
(D., Fla.) "We should not be drilling there."

Cuba's state oil firm, Union Cuba Petroleo, could not be reached for
comment. Ms. Ritter, the Repsol spokeswoman, declined to comment on the
project beyond confirming plans for the rig. Repsol has operations in
many parts of the world, including the U.S. portion of the Gulf of Mexico.

Drilling off Florida in U.S. waters has been banned by federal
moratorium for decades. To protect the state's tourism-based economy,
Gov. Charlie Crist, who is running for the U.S. Senate as an
independent, is floating a proposal for an amendment to the Florida
constitution to ban offshore drilling there permanently.

It's not clear what U.S. or Florida officials could do to stop oil
exploration in Cuba. The U.S. controls coastal waters up to 200 miles
from its shores, but under a 1977 treaty it agreed to divide the Straits
of Florida equally with Cuba. That means Repsol can drill a deepwater
well about the same distance from Key West, Fla., as the Deepwater
Horizon was from the Louisiana coast.

The rig headed for Cuban waters has five rams in its blowout preventer,
each designed to help shut off an out-of-control well. The Deepwater
Horizon's blowout preventer had only four.

In the event of a spill in Cuban waters, many ships, equipment and
personnel from the U.S. Gulf Coast could be prevented from helping
because of the embargo. But that may be changing. A Treasury Department
spokeswoman said some U.S. firms involved in oil cleanup have been
issued licenses to travel to Cuba in case oil from the continuing spill
hits beaches there.

Cuba's efforts to promote offshore oil exploration appear close to
paying off. Cuba imports about 110,000 barrels of oil daily and produces
an additional 52,000 barrels, mostly from onshore and shallow-water
fields, according to the U.S. Energy Information Administration.

Ms. Ritter said Madrid-based Repsol plans to drill a new well near the
2004 well as soon as the rig—called the Scarabeo 9—is ready.
Construction of Scarabeo 9 is expected to be complete at the end of 2010
or early 2011, said a spokesman for Enis SpA, an Italian company that
controls the rig. Repsol's partners on the well include Norway's Statoil
ASA and the overseas arm of India's state-run Oil & Natural Gas Corp.
Eight other foreign oil companies hold offshore leases in Cuban waters.

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