Cuba's offshore oil hopes rise, U.S. role uncertain

By Russell Blinch

WASHINGTON (Reuters) - A huge offshore drilling platform will soon be lumbering its way to Cuba, an event that could kick-start Cuba's bid for energy independence and pressure the Obama administration to allow American companies a piece of the action.

Although arrival details are murky, a rig has been found after a long search and could be drilling off Cuban waters in the next six to eight weeks by an international consortium looking to unearth a Caribbean energy trove, according to industry and diplomatic sources.

Industry players said finding a rig to drill in the deep waters was problematic because of the need to use equipment with less than 10 percent American technology, to comply with the long standing U.S. embargo against Cuba.

"It's a very sizable reserve that is well documented," said Jonathan Benjamin-Alvarado, political scientist at the University of Nebraska at Omaha.

Kirby Jones, president of Washington-based Alamar Associates, which advises companies wishing to enter the Cuban market, said an oil find would change the dynamics of the U.S.-Cuba relationship which have just begun to thaw under initiatives by President Barack Obama.

"The implications for Cuba are huge and the implications for U.S. relations are huge," Jones said. "It's the first time Cuba will have something of strategic importance to the United States."

President Obama has pledged a new beginning with Cuba and announced easing of some restrictions in a relationship that has remained frigid for nearly half a century.

U.S. COMPANIES MISS OUT?

A consortium lead by Spain's Repsol-YPF will be the first to begin drilling after taking possession of the rig. Repsol drilled a test well in 2004 and at the time said it discovered traces of high quality oil, but it was not commercially viable at the time.

Repsol has an agreement with Cuba for exploration on six offshore blocks and will this time team with Norsk Hydro and ONGC Videsh of India on the project.

One industry source said the drilling platform could eventually be used by other foreign interests for drilling offshore -- especially if results are promising.

But U.S. companies will be missing out, unless the Obama administration moves soon to exempt American roughnecks from the embargo between the two old adversaries.

The fields off Cuba's northern coast are estimated to contain some 5 billion barrels of oil and 10 trillion cubic feet of natural gas, according to the U.S. Geological Survey.

In the past, Cuba has said it would welcome American participation and U.S. industry is also keen to get involved and not lose out to foreign interests. Cuba is also wary of being overly dependent on Venezuela, headed by the mercurial Hugo Chavez, according to analysts.

Brian Petty, senior vice president of government affairs at the International Association of Drilling Contractors in Washington, said the industry is very keen on Cuba's prospects.