Cuban oil rig set to cause waves in Washington

LA JOLLA, Calif. Wed May 18, 2011 4:54am BST

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LA JOLLA, Calif. May 17 (Reuters) - The arrival of a unique oil rig off communist Cuba is set to cause waves in Washington, raising questions about U.S. drilling permits and the response to any disaster, a conference heard on Tuesday.

Spanish giant Repsol YPF is due to bring the Chinese-built Scarabeo 9 rig to the Caribbean island later this year to drill at least one well in partnership with Norway's Statoil and a unit of India's ONGC.

"I think it's going to have a much bigger impact on U.S. domestic policy than it is on Cuba," said Jorge Pinon, visiting research fellow with Florida International University Latin American and Caribbean Center's Cuban Research Institute.

The main reason is that Repsol plans to use the high-tech semi-submersible Scarabeo 9 for a deepwater drilling bid in Cuba's Gulf of Mexico zone, parts of which are within 50 miles of the Florida coast.

That puts the planned drill site close to areas where the Obama administration blocked U.S. drilling in the eastern Gulf of Mexico after BP's massive Deepwater Horizon oil spill last year.

"A lot of people are going to be knocking on doors in Washington, saying 'How come the Cubans are drilling and we're not allowed to drill in the eastern Gulf?'," Pinon told a Latin American energy conference in La Jolla, California.

U.S. EMBARGO

The Scarabeo 9 is unique because Repsol had to find an oil rig that met the terms of the 49-year-old U.S. embargo on Cuba, which limits the amount of U.S. technology that can be used in equipment used there. The embargo also prevents U.S. companies from operating on the island.

Pinon said the $750 million rig, which can drill in 12,000 feet of water, was due to leave Singapore next month and should arrive in Cuba in September or October.

He said the only U.S.-made part on the Scarabeo 9 was the blow out preventer -- one of the pieces of equipment that failed during the Deepwater Horizon disaster.

And that raises the other issue likely to make waves when the rig, owned by Italian service company Saipem and being prepared in Singapore, arrives off Cuba: what happens if there is a similar accident to the one off Louisiana?

"The U.S. embargo means Repsol can't pick up the phone to Washington," Pinon said. "Any equipment to help in a problem would have to come from the UK or Norway or somewhere else."

He said the U.S. government should formulate a "One Gulf" strategy with the international oil companies working in Cuba, as it is trying to do with Mexico, so that in the case of any emergency they could turn to the United States for help.

The U.S. government has said it would let U.S. companies that handle accidental oil spills operate in Cuban waters if the need arose. Pinon said that should be formalised.

Repsol drilled an offshore well in Cuba in 2004 and said it found oil, but described it as "non-commercial."

After drilling at least one well, Repsol is due to pass the Scarabeo 9 to Malaysia's state oil firm Petronas. Venezuela's PDVSA may also be in line to get the rig for its Cuban blocks.

The oil industry is watching the Repsol project very closely and if it finds significant reserves, more companies are likely to want to explore in Cuban waters.

Cuba has said it may have 20 billion barrels of oil offshore, although the U.S. Geological Survey has estimated 5 billion barrels.

(Editing by Ron Popeski)