U.S. Oil Industry Lobbying on Cuba Issues

By Lenore T. Adkins

Sept. 2 — Two major oil companies and one of the world's largest oil field services companies spent almost $5 million lobbying Congress and federal agencies in the second quarter on multiple issues, including economic sanctions on Cuba that thwart their access to a country with potentially significant offshore petroleum reserves.

Shell Oil Company, the U.S.-based subsidiary of Royal Dutch Shell, reported spending almost $2.5 million from April through June lobbying the federal government on a laundry list of topics—including issues related to Cuba sanctions, disclosure reports show. Chevron U.S.A. Inc. reported shelling out almost $2.2 million to influence the federal government on issues including the “lifting of Cuba sanctions.” Meanwhile, Halliburton spent $100,000 plugging multiple matters, including “Cuba status,” the disclosures show. The forms, filed July 20, do not break out how much money was spent on individual issues, and company representatives offered no hint on their commercial interest in Cuba.

But with the U.S. Geological Survey estimating Cuban oil reserves at about 4.6 billion barrels, including roughly 70 percent within 50 miles off the island's western and northern shores, the island nation has potential both as an oil producer and a market for modern oil-drilling technology. Former EPA Administrator William Reilly said he suspects the three companies are lining up for potential access to the island's economy.

“If ever there’s an industry with a long trajectory forward, it's the oil industry because whatever they plant and successfully gives them oil won’t be seen for five or even 10 years,” said Reilly, who led the Environmental Protection Agency during the George W. Bush administration and was named by President Barack Obama as co-chairman of a commission that studied the 2010 BP Deepwater Horizon oil spill that dumped 3.19 million barrels of oil into the Gulf of Mexico just 42 miles off the Louisiana coast. “They may just want to be in the queue when finally there's some value for being in the queue.”

The 53-year old U.S. embargo against Cuba continues to bar most U.S. companies from doing business with the communist nation, but relations have begun to thaw with the recent reestablishment of diplomatic relations between the two countries and the introduction of policies that allow limited trade and travel to Cuba. That may mean eventual opportunity for U.S. companies.

“Shell is constantly evaluating potential opportunities around the world to find those that fit best into our global portfolio,” Shell spokesman Curtis Smith said via e-mail. “While it’s possible Cuba could potentially play such a role, we are still in the process of understanding the implications of recent changes in U.S. policy and time lines for any possible future action by the U.S. government.”

Halliburton spokeswoman Susie McMichael said the company also is closely monitoring discussions between the U.S. and Cuba, as well as related talks on Capitol Hill. Pointing to a long-standing policy, Chevron spokeswoman Melissa Ritchie declined to comment on specific business opportunities. Sabrina Fang, a spokeswoman for the American Petroleum Institute, said the association is watching the Cuba issue “very closely.”

Wells Run Dry

Despite the optimistic estimates about Cuban offshore reserves, foreign companies so far have had little success with deepwater exploration off the country's shores. Three offshore exploration wells drilled in 2012 came up dry, and Jorge Pinon, director of the Latin America and Caribbean Energy Program at the University of Texas at Austin, is not convinced the U.S. oil industry is in any hurry to start drilling in Cuban waters. Pinon, former president of Amoco Corporate Development Company Latin America, said it's possible Shell, Chevron and Halliburton merely want to register their views on the embargo.

“That doesn't mean they necessarily want to do business with that country, it's just a policy,” Pinon said.

Halliburton may have an interest in providing enhanced oil recovery services to Cuba's national oil industry, Pinon said. And if Cuba shifts its dependency from oil to natural gas, American. energy companies may be interested in selling some of the abundant U.S. gas to the country, he said.

“There you could very well see a Shell or Exxon ... have interest in Cuba because they could be exporters of LNG [liquefied natural gas] to Cuba,” he said. “That, to me, is it.”

Safety First

Cuba needs 150,000 barrels of oil daily and produces 50,000 barrels on its own, with Venezuela supplying the rest under preferential payment terms. But Venezuela faces serious economic problems that could eventually prevent it from subsidizing oil exports to Cuba. Increasing domestic production could do more than ease Cuba's dependency on Venezuela and create jobs. If the Cubans refine their own crude oil or send it to Trinidad, that could also make money for the government, Reilly said.

But Reilly noted that Cuba's expertise lies with drilling in shallow waters. U.S. drilling equipment and technology is widely regarded as the best and safest in the world, he said, and American companies might highlight that expertise in a push for access to Cuba.

“The companies could well make the case — and I would help them make the case — that it would advance the safety of Florida and the environment and the Gulf if American companies ...were doing the drilling in Cuba,” Reilly said. “There ought to be a blanket exemption for anything relating to spill control.” 

To contact the reporter on this story: Lenore T. Adkins ladkins@bna.com

To contact the editor responsible for this story: Heather Rothman hrothman@bna.com