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Are the Chinese Drilling of Florida's Coast?

It's become a regular talking point in energy policy debates that China and Cuba are drilling for oil only 60 miles off of Florida's coast. If true, it would mean that China is drilling for oil closer to Florida than any U.S. firm. But this report from the McClatchy news service says it's just an urban legend.

no one can prove that the Chinese are drilling anywhere off Cuba's shoreline. The China-Cuba connection is "akin to urban legend," said Sen. Mel Martinez, a Republican from Florida who opposes drilling off the coast of his state but who backs exploration in ANWR.

"China is not drilling in Cuba's Gulf of Mexico waters, period," said Jorge Pinon, an energy fellow with the Center for Hemispheric Policy at the University of Miami and an expert in oil exploration in the Gulf of Mexico. Martinez cited Pinon's research when he took to the Senate floor Wednesday to set the record straight. . . .

China's Sinopec oil company does have an agreement with the Cuban government, but it's to develop onshore resources west of Havana, Pinon said. The Chinese have done some seismic testing, he said, but no drilling, and nothing offshore. . . .

Cuba's state oil company, Cupet, has issued exploration contracts to companies from India, Canada, Spain, Malaysia and Norway, according to diplomats.

But many oil companies from those countries have expressed reservations about how to turn potential crude oil into product. Cuba doesn't have the refinery capacity, and the Cuban embargo prohibits the oil from coming to U.S. refineries, Pinon said.

The most recent high-profile contract with Cuba went to Brazil's state oil company, Petrobras. Cuba inked a contract with Petrobras in January, allowing the Brazilian energy giant to search for oil in the deep waters of the Gulf of Mexico that are within Cuba's sovereign territory.

Stormy Dragon (mail) (www):
I'm not sure I see the problem even if China were drilling off the coast of Florida. Given that oil is a fungible commodity, US consumers receive the same benefit from the increased supply no matter who is doing the extraction.
6.12.2008 8:44am
Boularderie (mail):
The kind of down the nose, over the eyeglasses, continuing raised-eyebrow monitoring of the Cuba's situation from America belongs no where near the twenty first century.

These folks have sent the message, long ago and clearly-- they want to be lefton their own.

Get over America. Teddy Roosevelt is dead. Monocles are dead.

Urban legends or not, its time for the States should back way off and leave these people alone.
6.12.2008 8:53am
Boose:
Yep, leaving communism alone is always the best of options...
6.12.2008 9:08am
therut:
These folks = that dictator and the left in the USA and world wide supportors of communism. Yep leave those poor folks alone will ya!!!!!!
6.12.2008 9:12am
Tyrant King Porn Dragon (mail):

Sen. Mel Martinez, a Republican from Florida who opposes drilling off the coast of his state but who backs exploration in ANWR.

My goodness, another NIMBY Republican hypocrite. Who'd have guessed. (And yes, Kennedy is just as bad)

Cuba doesn't have the refinery capacity, and the Cuban embargo prohibits the oil from coming to U.S. refineries, Pinon said.

You know, if you're worried about Chinese influence on our hemisphere, an obvious solution suggests itself :)

"These folks = that dictator and the left in the USA and world wide supportors of communism. Yep leave those poor folks alone will ya!!!!!!"

... and that solution is not 'blockade Cuba and keep foreign investors out until its people are forced, by poverty and starvation, to overthrow Raoul and inaugurate a pro-American, free-market capitalist government', much as certain parties might like it to be.
6.12.2008 9:21am
Angus:
The way the U.S. has handled Cuban relations since Castro came to power in 1959 has been: 1) an abject failure, and 2) downright embarrassing. Particularly since Castro came to the U.S. shortly after assuming power looking for U.S. assistance for his government, and getting only the cold shoulder. If the U.S. had made just a few different decisions then or along the way, it could have been U.S. oil companies exploring off the Cuban coast.
6.12.2008 9:28am
Virginian:

I'm not sure I see the problem even if China were drilling off the coast of Florida. Given that oil is a fungible commodity, US consumers receive the same benefit from the increased supply no matter who is doing the extraction.


I am pretty sure that our government demands kickbacks royalties for drilling rights on public property (which I presume this would be).

I agree with you that having that oil hit the market would be good, but we would lose the extra revenue to the federal govt.
6.12.2008 9:52am
RSF677:
"My goodness, another NIMBY Republican hypocrite. Who'd have guessed. (And yes, Kennedy is just as bad)"

difference is the fact that the people of Alaska are widely in favor of ANWR drilling while the people of Flordia are opposed.
6.12.2008 9:52am
advisory opinion:
Off topic: the Supreme Court apparently reversed the D.C. Circuit in Boumediene, Kennedy breaking with the 'conservative four'. There's your 5-4.
6.12.2008 10:08am
Iolo:
I'm not sure I see the problem even if China were drilling off the coast of Florida. Given that oil is a fungible commodity, US consumers receive the same benefit from the increased supply no matter who is doing the extraction.

If China and Cuba sign a long-term bilateral supply contract, no such fungibility would exist and US consumers would receive no benefit. The oil, in effect, would be locked up out of the global market.

Yep, leaving communism alone is always the best of options...

It certainly isn't clear why Cuba should be isolated while China (yes, it's still Communist!) should be enthusiastically embraced.
6.12.2008 10:17am
BobDoyle (mail):
If China and Cuba sign a long-term bilateral supply contract, no such fungibility would exist and US consumers would receive no benefit. The oil, in effect, would be locked up out of the global market.


Oil is fungible. So if China "locks up" say, for argument's sake, 20% of their oil needs in a long-term bilateral contract with Cuba, then that 20% they would otherwise buy in the world market is now available for other users, so, of course, U.S. consumers and all other world consumers would benefit by the increased supply. It is faulty economic reasoning to argue otherwise.
6.12.2008 10:26am
M. Gross (mail):
difference is the fact that the people of Alaska are widely in favor of ANWR drilling while the people of Flordia are opposed.

That's not much of a justification. I don't see why Texas has to suck up having offshore oil drilling for the good of the nation and Florida doesn't.
6.12.2008 10:41am
Dan Hamilton:

Oil is fungible. So if China "locks up" say, for argument's sake, 20% of their oil needs in a long-term bilateral contract with Cuba, then that 20% they would otherwise buy in the world market is now available for other users, so, of course, U.S. consumers and all other world consumers would benefit by the increased supply. It is faulty economic reasoning to argue otherwise.


You are assuming that China would buy 20% less! Not a good assumtion. They will use that and still buy more on the market. The demand in China and India is going no place but UP way UP.
6.12.2008 10:45am
Virginian:

I don't see why Texas has to suck up having offshore oil drilling for the good of the nation and Florida doesn't.


It boggles my mind that we are not drilling anywhere and everywhere in this country for oil and natural gas.
6.12.2008 10:47am
Richard Aubrey (mail):
I guess the question is; What would be the political and financial impact if the Chinese (or others) started drilling there while our own democrats colluded by insisting we can't.
The point is not that it isn't happening now. The way this issue is presented, that could mean the drilling rig hasn't finished its final tests, or that nothing actually is happening. Or in between. Or be absolutely false.

The question is what happens if/when? US drillers are, presumably, held to a higher standard than the folks who brought you 437,000 rural school buildings in China, now rubble with kids pureed into the muck. And who you gonna sue if a Cuban-based rig falls apart and the Gulf Coast of Florida turns black? Right.
6.12.2008 11:05am
Michael B (mail):
What do the following have in common?

- the eastern Gulf of Mexico
- Rockie Mt. shale deposits
- Atlantic and Pacific coastal regions
- northern Alaska

Some valid points of reference: oil, in some instances positively huge reserves; politics as morality plays and moral triumphalism, largely from Left/Dem quarters; a certain myopia, especially so given technological advances, including advances that would help to ensure environmental security.

Oh well, rather than change, substantive change, it seems the country prefers Changeā„¢ as sloganeering and emotional relief and as a continuation of that moralistic triumphalism and the myopia and stunted vision that results. Politics as tragi-comic soap opera and self-regard.
6.12.2008 11:41am
Floridan:
I'm happy to see Dick Cheney speading this urban myth -- I mean, if you can't trust Cheney to give out false information for narrowly partisan purposes, what's the world coming to?
6.12.2008 11:44am
cognitive dissident (mail) (www):
I've already written two pieces (here and here) on George Will's errors from his ANWR column last week, and you had to go and find another mistake...

Can't that bow-tied buffoon get anything right?
6.12.2008 12:13pm
Stormy Dragon (mail) (www):
I am pretty sure that our government demands kickbacks royalties for drilling rights on public property (which I presume this would be).

I agree with you that having that oil hit the market would be good, but we would lose the extra revenue to the federal govt.


So it's bad to have China in the gulf because our government would lose the revenues it's not collecting anyways since it won't allow drilling there?
6.12.2008 2:29pm
Stormy Dragon (mail) (www):
You are assuming that China would buy 20% less! Not a good assumtion. They will use that and still buy more on the market. The demand in China and India is going no place but UP way UP.


They won't buy 20% less than they do now, but they will buy 20% less than they would have bought then without the Cuban oil.
6.12.2008 2:33pm
Virginian:

So it's bad to have China in the gulf because our government would lose the revenues it's not collecting anyways since it won't allow drilling there?


I was responding to this statement:


Given that oil is a fungible commodity, US consumers receive the same benefit from the increased supply no matter who is doing the extraction.


I certainly believe that the US govt should be allowing US companies to drill for oil (off FL, off CA, in ANWR, in Ted Kennedy's backyard if there's oil there), thereby increasing world oil supply and increasing US govt revenues.
6.12.2008 2:56pm
A. Zarkov (mail):
"... its time for the States should back way off and leave these people alone."

That's precisely Cuba's problem-- the US leaves them alone. Cuba would like to buy from the US, but they have no hard currency to make the purchases, so they need credit, and the US won't give them credit. If Cuba had hard currency the US trade embargo would be meaningless. They could buy from other countries. They could even buy US goods through a foreign proxies.

Cubans drive old cars because they're poor. If they weren't poor, the Japanese would be only too happy to sell them Toyotas.
6.12.2008 3:26pm
A. Zarkov (mail):
Stormy Dragon:

"They won't buy 20% less than they do now, but they will buy 20% less than they would have bought then without the Cuban oil."

Not necessary. It all depends on price-- current and future. If the Cuban oil is cheap enough then, China should buy it and put it into stockpile. If you think oil will be more expensive in the future, then it pays to buy as much as you can now. Look at the discounted future price and compare to current price. The compute the opportunity cost on the money used to make the purchase.
6.12.2008 3:32pm
Richard Aubrey (mail):
Well, if it's fungible, maybe we could make some money on it instead of the Saudis. Maybe we could take advantage of not having to haul it across the ocean. Maybe we could reduce the effect of a major shortage, deliberate or natual, by having more of it available right here.

Maybe if we started drilling here, the congressmen and State deparatment officials would lose their Saudi paychecks on account of failure to perform.
6.12.2008 4:07pm
A. Zarkov (mail):
"... we started drilling here, the congressmen and State deparatment officials would lose their Saudi paychecks on account of failure to perform."

You just earned your pay for the week. Bull's eye. Someone should find out how many ex State Department officials and Congressmen are on the Saudi payroll as consultants or lobbyists. I believe Bill Clinton has some deal with the Arabs. Ever wonder why someone would pay him $100,000 for a 40 minute speech? Outfits like Morgan Stanley.
6.12.2008 4:59pm
Steve2:

What do the following have in common?

- the eastern Gulf of Mexico
- Rockie Mt. shale deposits
- Atlantic and Pacific coastal regions
- northern Alaska


I'd say it's that if the US doesn't drill them now, and instead leaves them untapped for later, they'll be a nice strategic reserve when all the rest of the world's going all Mad Max...
6.12.2008 7:27pm
Stormy Dragon (mail) (www):
Not necessary. It all depends on price-- current and future. If the Cuban oil is cheap enough then, China should buy it and put it into stockpile. If you think oil will be more expensive in the future, then it pays to buy as much as you can now. Look at the discounted future price and compare to current price. The compute the opportunity cost on the money used to make the purchase.


If China has an expectation that future price increases justify this behavior, there would be a benefit in doing that with the non-Cuban oil as well. So adding the Cuban oil still doesn't increase China's consumption beyond what it would have otherwise been.

If the stockpiling decision comes not from expected future pricing increases, but because Cuba (for some insane reason) to sell the oil to China at a significantly below market price, then it's not in China's interest to stockpile it, but to resell it immediately.
6.12.2008 7:45pm
A. Zarkov (mail):
"... there would be a benefit in doing that with the non-Cuban oil as well."

It would, but where's the non-Cuban oil available at the right price?

" ... but because Cuba (for some insane reason) to sell the oil to China at a significantly below market price, then it's not in China's interest to stockpile it, but to resell it immediately."

Cuba would sell oil to China at below market price in exchange for other benefits such as the capital to exploit the oil field, or purchasing sugar cane at above the market price to name a few of many. China might also want to damage the US economy by locking up the oil supply. So far China has done a brilliant job of hollowing out American productive capacity.
6.12.2008 8:18pm
Smokey:
The kind of down the nose, over the eyeglasses, continuing raised-eyebrow monitoring of the Cuba's situation from America belongs no where near the twenty first century.
Wouldn't you know it? Right at the beginning of the discussion, the French CESM is ready to wave the white flag. *Sheesh* Some people jump right over stereotype and go directly into parody.

Do the useful fools forget that Fidel Castro worked hard to spread anti-American communist dictatorships throughout Central and South America? Remember the Sandanistas? And Grenada? And the Phillippines? And now Venezuela? And Ecuador? And in Africa, always as proxy stooges for their Soviet masters? [Well, until an outnumbered South African force rubbed Fidel's nose in the playground sand in Angola, putting a decisive end to the myth of his Cuban army's invincibility.]

Useful fools still idolize Che Guevara's communist terror tactics of summarily murdering every farmer he thought looked at him wrong. This is behavior these folks actually admire, and they want to reward it by shoveling free U.S. money at the Cuban dictatorship [which is always their unstated goal]. Tens of thousands of peasants murdered in cold blood, and for what? So Fidel could be a tin pot absolute dictator, living off Russian largesse in return for wearing their puppet strings, while the Cuban people lived like paupers? Castro's apologists have a warped idea of right and wrong.

So now that the Berlin Wall is down, we're supposed to suddenly play kissy-face? Let them come hat in hand first. Even Viet Nam and China are going capitalist. But not Cuba. The Cuban dictator still keeps the thumbscrews on his untrustworthy proletariat, just like his cronies in Burma and North Korea. The fact that some folks think that's fine tells you everything you need to know about their ideas concerning who should be free in this world and who shouldn't. It's the ordinary Cubans living in a police state who want to be left alone -- while Castro's servile apologists keep telling us to leave the poor dictatorship alone!

Lemme guess: the useful fools still have their wet dream fantasies that "come the revolution" they wil be the ones who get to stand American citizens who don't agree with them up against the wall, just like their HE-ROES Fidel and Che.

/rant
6.12.2008 8:26pm
GatoRat:
Even conservative estimates put the oil reserves under the Caribbean at greater than all the middle east. Problem is that it's deep. Still, I've been amazed for some time that Cuba hasn't put resources into oil exploration. (Cuba's failure to exploit other relatively large natural resource reserves is a pretty damning indictment of Castro.)
6.12.2008 10:47pm
Richard Aubrey (mail):
Everybody with more than one hundred shares of PetroFidel in their 401k raise their hands.
Thought so.
Why shouldn't our guys make some money? That way, we could all retire earlier.
Just for grins, does anybody have a clue what the point is in locking up OUR OWN ENERGY?
6.12.2008 11:35pm
Stormy Dragon (mail) (www):
China might also want to damage the US economy by locking up the oil supply.
Yes clearly they making us their largest trading partner so that any prolonged US downturn would drag their economy down with us is the first step in some devious plan to destroy the US economy. Once we default on our obligations just think how much all those US treasury securities they're holding will be worth!
So far China has done a brilliant job of hollowing out American productive capacity.
'Hollowed out' is apparently paranoiac for 'massively increasing' since our manufacturing output is higher than its ever been.
6.12.2008 11:46pm
Michael B (mail):
"Just for grins, does anybody have a clue what the point is in locking up OUR OWN ENERGY?"

Precisely. Our own.

It's known, at least in substantial part, as the Left/Dems and Dems treating the American public as if they're the ideological and moralistic yo-yos of those Left/Dems. Hence no wind farm near Ted Kennedy's residence, no exploration on the eastern Gulf, no exploration of Rockie Mountain shale deposits (which are huge), no exploration on either coasts, no exploration in northern Alaska - all while we begin to edge toward $5.00 a gallon gas and also continue a truly debilitating and arguably a masochistic dependency on Saudi and other foreign oil.

Ideological and moralistic yo-yos.

(And yes, it would need to be well managed from all angles, that much if obvious. But all those areas, excepting northern Alaska, have prospects for absolutely monstrously huge reserves, and Alaska's ain't so bad itself.)
6.13.2008 1:30am
A. Zarkov (mail):
"Once we default on our obligations just think how much all those US treasury securities they're holding will be worth!"

Good luck. The US has never defaulted. Even after the Revolutionary War Hamilton insisted the US honor its debts.

'Hollowed out' is apparently paranoiac for 'massively increasing' since our manufacturing output is higher than its ever been.


Not as a percentage of our GNP. How come I can hardly buy any consumer good made in the US? And consumer good are 72% of the economy. How come we have a giant trade deficit? We have a negative individual savings rate. And so on.
6.13.2008 5:00am
Mad Max:
does anybody have a clue what the point is in locking up OUR OWN ENERGY?

Assuming that oil is a finite resource, we want to use up everyone else's oil first, and our own last (as Steve2 said).
6.13.2008 11:25am
Richard Aubrey (mail):
Mad. In a different world, that would be nice. But while we're doing that, the everybody else is using our money in a war against us. Minor detail, to be sure.
What would really suck is to pay out to the everybody else and have an efficient, economical, easily distributed, non-polluting, alternative come along before we get to ours which will then become irrelevant.
Then our plans of screwing as we have been screwed are screwed.
6.13.2008 11:36am
Mad Max:
while we're doing that, the everybody else is using our money in a war against us. Minor detail, to be sure.

If we were entirely self-sufficient in energy, that would not shut down or even seriously inhibit the flow of oil dollars to nasty countries. That Saudi and Iranian oil is going to find a buyer.

What would really suck is to pay out to the everybody else and have an efficient, economical, easily distributed, non-polluting, alternative come along before we get to ours which will then become irrelevant.

Until you know when this magical transition will occur, it is smart to keep the reserve in the ground.
6.13.2008 1:13pm
Richard Aubrey (mail):
Mad. If we were entirely self-sufficient, we wouldn't be buying on the world market. The unit price--thus the profit--would be lower. And when the volume's lower, you can't make it up in volume.
And we'd have our money. Not them.
6.13.2008 1:48pm
Mad Max:
The US stops buying imported oil, that frees up a lot of cheap oil for China, thus accelerating its economic growth. The bad guys still get their money - albeit slower than they would have - and China gets more powerful even faster than it would have otherwise. What a bargain!
6.13.2008 1:56pm
altabird (mail):
How does the EEZ (exclusive economic zone) under the UN Convention on the Law of the Sea work in this situation?(EEZs typically extend 200 miles out from a country's coast). Both the US and Cuba share the same EEZ since they are only 100 miles apart from each other. Based on this link, it would seem that Cuba could, theoretically, drill for oil within 60 miles of our coast.

http://www.nmfs.noaa.gov/ole/news/news_SED_060904.htm
6.13.2008 3:47pm
Richard Aubrey (mail):
alta.
You think the Un would vote in favor of the US?
Ooooookay.

Given the rate at which oil is being discovered )Brazil, Gulf of Mexico, Canada's oil sands), the point at which the world seriously runs out extends further and further into the future. Which means closer and closer to a fabulous alternative. While we still have ours in the ground.
6.13.2008 11:21pm