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Cuba-U.S. Drilling Pact Should Follow BP Gulf Spill, Panel Says

Jan. 26 (Bloomberg) -- President Barack Obama should press Cuba to accept tougher offshore-drilling standards as the Cuban government prepares to seek oil 50 miles from Florida, the co-head of a panel on the BP Plc spill said.

The best way to influence Cuba may be through Mexico, which has favorable relations with that government, William Reilly, co-chairman of the National Commission on the BP Deepwater Horizon Oil Spill, said today at a U.S. Senate energy committee hearing. Mexico’s recommendations “would be taken seriously” by the Cuban government, said Reilly, who described the two countries’ offshore-development plans as “worrisome.”

Cuba has leased tracts 50 miles off the Florida coast and has plans for seven exploratory wells by 2014, the commission said in a Jan. 11 report. Petroleos Mexicanos, Latin America’s largest oil producer, intends to auction deep-water contracts as early as 2012.

“Mexico would very much like a treaty,” Reilly said. “We recommend an agreement among the three countries on best practices.”

Earlier this month, the commission called for “urgent reform” of government rules and oil-industry practices to prevent a repeat of disasters similar to BP’s spill. An April 20 blowout at BP’s Macondo well killed 11 workers, injured 17, destroyed Transocean Ltd.’s $365 million Deepwater Horizon rig and spewed crude for 87 days.

Bipartisan Panel

Reilly, a Republican and former administrator of the Environmental Protection Agency, and commission co-chairman Bob Graham, a former Democratic senator and Florida governor, appeared today before Congress for the first time since the release of the group’s final report.

The bipartisan panel, created in May by President Barack Obama, began work following the disaster aboard the rig leased by BP in the Gulf of Mexico. The panel concluded that systemic management failures at the London-based company and its main contractors caused the catastrophe, showing a need for an overhaul of the industry and government rules.

Reilly said he has met with Mexico’s offshore-drilling regulator and that U.S. Interior Secretary Ken Salazar has discussed the issue with Mexican President Felipe Calderon. Repsol YPF SA, Spain’s largest oil company, and OAO Gazprom Neft, the oil unit of Russia’s state-controlled gas producer, “have either drilled exploratory and production wells or are likely soon to do so,” according to the commission’s report.

National Objectives

“Potential drilling sites are close enough to waters and land within U.S. jurisdiction -- Cuba’s mainland lies only 90 miles from Florida’s coast and the contemplated wells only 50 miles -- that if an accident like the Deepwater Horizon spill occurs, fisheries, coastal tourism, and other valuable U.S. natural resources could be put at great risk,” according to the report.

“The U.S. objectives should be to prevent drilling by companies unwilling or unprepared to meet the high safety standards essential to extracting oil and gas resources responsibly and to have a verification process to ensure compliance,” the report concluded.

To contact the reporters on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net; Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net.

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.

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