Thanks to the president of Argentina, Floridians can breathe a temporary sigh of relief about the danger of crude oil spilling off the coast of Cuba and reaching our beaches.
This fortuitous development involves a chain of international cause-and-effect actions rich with irony. As I will explain, the Argentinean president, an admirer of Cuban dictator emeritus Fidel Castro, has unwittingly helped stymie the urgent search in Cuban waters for desperately needed oil and gas.
As is well known, after taking control in 1959, Fidel Castro “expropriated” without compensation (i.e., stole) both domestic and foreign-owned properties throughout Cuba, triggering the United States economic embargo. Castro-like, the Argentinean president, Cristina Fernandez de Kirchner, decided in April to “expropriate” an important component of the private oil and gas industry in her South American nation.
Fernandez got it into her head that her government should control the oil and gas interests in Argentina owned by a major foreign company. She thus took up arms against Repsol YPF, S.A., one of the biggest private oil firms in the world, headquartered in Spain.
Back in 2000, Repsol agreed to help the Castro government search for offshore oil and gas. To avoid the U.S. embargo, Repsol leased an Italian deepwater drilling rig, built in China and Singapore, that flies the flag of the Bahamas. The offshore drilling began in earnest in January, just northwest of the capital city of Havana, about 90 miles south of Key West.
The Repsol exploration became a hugely important project for the Castro dictatorship because Cuba has never produced enough oil from its land wells to cover more than a third of its domestic consumption. In recent years the island has survived through the beneficence of another Fidel Castro admirer, the president of Venezuela, Hugo Chavez, who provides the island $3 billion of subsidized oil each year. That lifeline, however, is currently in peril, because Chavez is facing a contested re-election on Oct. 7 and because he is fighting cancer.
On April 16, President Fernandez dramatically announced that she was “expropriating” 51 percent of Repsol’s interest in its Argentina subsidiary, YPF, the country’s largest oil and gas company. No compensation was announced, but Repsol valued its expropriated stock at $10.5 billion.
The Cuban government immediately supported Fernandez’s action: “The Argentine Republic … is acting within its rights to fully exercise its sovereignty over its natural resources … based on international law.”
Then, perhaps because of Fidel Castro’s bad karma, barely a month later Repsol let it be known that the offshore well near Havana had come up dry and would be capped and abandoned.
This week, Repsol announced in Madrid that it would not drill additional oil wells in Cuban waters. Expecting to lose billions through the Argentinean expropriation, Repsol decided not to risk any more shareholder money in Cuba. As a result, it probably will be months or even years before any other companies can find production-worthy amounts of oil in Cuban waters.
Repsol is moving on to the more promising Atlantic deepwater Campos Basin, off the Brazilian coast of the State of Rio de Janeiro. Brazil’s president Dilma Rousseff and Florida Gov. Rick Scott should send thank-you notes to the president of Argentina.
Angel Castillo, Jr., a former reporter and editor for the New York Times and The Miami Herald, practices employment law in Miami. He can be reached at firstname.lastname@example.org.
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