Interesting article - Cuba expands energy program

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One day soon — possibly before the end of this year — an oil rig will maneuver into position in waters less than 100 miles from the coast of Florida. A drill will plunge into the inky sea and begin chewing its way into the ocean floor, hunting for oil.

But the drilling rig won't belong to an American company, and any petroleum it discovers won't do a thing to curb the USA's addiction to foreign oil. Instead, any new sub-sea gusher will belong to Cuba.

That's right: Cuba. The island nation long has been known for its aromatic cigars and sweet rums. But after years of limited oil production on lands around Havana and in neighboring Matanzas province, Cuba is poised for a significant expansion of its oil program into the waters that separate it from the United States. And thanks to U.S. law, Cuba's drilling partners will be working closer to Florida beaches than any American company ever could.

"Our studies … have shown there is a great potential, especially offshore," says Dagoberto Rodriguez, the senior Cuban diplomat in the USA. "Basically, we know that there is oil. The problem is just where it is."

The U.S. Geological Survey (USGS) agrees. Two years ago, after reviewing available data on the subterranean structures in the region, the agency estimated Cuba can lay claim to 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas.

With oil prices hovering around $60 a barrel and global supplies persistently tight, any new supply source could benefit the USA, the world's top oil consumer. Likewise, Cuba, which relies on Venezuela for more than half of its daily oil consumption, craves self-sufficiency. "In economic terms, it could be a win-win," says Daniel Erikson, an analyst at the Inter-American Dialogue, a Washington, D.C., think tank.

There's just one problem: politics. Since 1962, the U.S. has maintained an economic embargo of Cuba, aimed at toppling the communist government of Fidel Castro. The ailing dictator, who has outlasted nine U.S. presidents, last summer handed power temporarily to his brother, Raul, while he recovers from abdominal surgery. Companies such as ExxonMobil (XOM), Chevron (CVX) and Halliburton (HAL), however, remain barred from the Cuban market, which a 2001 Rice University study said could be worth up to $3 billion annually.

The embargo also will increase the time and cost of the Cuban program by denying Havana access to the closest source of oil industry technology, spare parts and expertise. Likewise, U.S.-owned refineries in Aruba and St. Croix are off-limits for any of the heavy, sulfur-rich Cuban crude.

"The U.S. (embargo) presents them with significant barriers and obstacles," says Jonathan Benjamin-Alvarado, a political scientist at the University of Nebraska who studies Cuban energy issues.

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