Oil reserves could thaw U.S.-Cuba tie

WASHINGTON - Deep in the Gulf of Mexico, an end to the 1962 U.S. trade embargo against Cuba may be lying untapped, buried under layers of rock, seawater and bitter relations.

Oil, up to 20 billion barrels of it, sits off northwest Cuba in territorial waters, according to the Cuban government - enough to turn the island into the Qatar of the Caribbean. At a minimum, estimates by the U.S. Geological Survey place Cuba's potential deep-water reserves at 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas, stores that would rank the island among the region's top producers.

Drilling operations by foreign companies in Cuban waters are still in the exploratory stage, and significant obstacles - technological and political - stand between a U.S.-Cuba rapprochement eased by oil. But as the Obama administration gestures toward improved relations with the Castro government, the national security, energy, and economic benefits of Cuban crude may make it a powerful incentive for change.

Thawing relations could eventually open up U.S. investment in mining, agriculture, tourism, and other sectors of Cuba's tattered economy. But the prospect of major offshore reserves that would be off-limits to U.S. companies and consumers has some Cuba experts arguing that 21st-century energy needs should prevail over 20th-century Cold War politics.

"The implications of this have the potential to be a sea change, literally and figuratively, for the Cubans," said Jonathan Benjamin-Alvarado, a political scientist at the University of Nebraska-Omaha who studies Cuba's energy sector.

At a House subcommittee hearing last month on U.S.-Cuba policy, former oil executive Jorge Pinon said that the United States had a strategic interest in helping Cuba tap its potentially vast hydrocarbon stores and that U.S. companies should receive special permission to do so.

"American oil and oil equipment and service companies have the capital, technology and operational know-how to explore, produce and refine in a safe and responsible manner Cuba's potential oil and natural gas reserves," said Pinon, a member of a Brookings Institution advisory group on Cuba policy reform. "Yet they remain on the sidelines because of our almost five-decade-old unilateral political and economic embargo."

Cuba has said it welcomes U.S. investment, but American companies remain largely silent, at least in public, bound by trade sanctions established under the Kennedy administration. When Cuban oil officials and U.S. companies attended a joint energy conference at an U.S.-owned hotel in Mexico in 2006, the Bush administration forced the facility to expel the Cuban delegation, trying to thwart any potential for partnership.

At the energy conference, U.S. oil companies "all had plans to move forward as soon as the U.S. government gives them the go-ahead," said Benjamin-Alvarado, who attended the conference.

If that go-ahead is granted, U.S. companies would enter a drilling contest crowded with foreign competitors. Several global firms, including Repsol (Spain), Petrobras (Brazil), and StatoilHydro (Norway) are exploring in the Gulf of Mexico through agreements with the Castro government, and state companies from Malaysia, India, Vietnam, and Venezuela have also signed deals.