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Posted July 07, 2004 by publisher in Cuba-World Trade

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By Brian Gorman | [url=http://www.fool.com]http://www.fool.com[/url]

Spanish oil and gas company Repsol YPF (NYSE: REP) is currently facing a big risk, but it’s a gamble a lot of American companies would gladly take.

A New York Times article yesterday explained that the firm is now drilling for oil off the coast of Cuba. Repsol is sinking $200,000 a day into the venture, which it launched in partnership with the Cuban government. The chances for success are slim, so for the energy concern, discovery of large energy reserves would be a major coup. But a major find would be an even bigger victory for cash-strapped Fidel Castro, which is perhaps precisely why U.S. companies are prohibited from exploring in Cuba.

Not that American corporations are not interested in the communist island nation. Halliburton has expressed its support for lifting the long-held sanctions that block most U.S. firms from doing business with Cuba. Despite the White House’s supposed ties to the company through Vice President Dick Cheney, so far the administration has only tightened restrictions.

One wonders, though, whether this policy makes sense. No one wants to coddle dictators, but the track record of economic sanctions has not been stellar. Sanctions failed to change leadership in Iraq, and Castro continues to maintain a firm grip on Cuba, while the populace in each of these countries has suffered from lack of trade.

Meanwhile, the United States has re-opened relations with Libya, providing an opportunity for ConocoPhillips (NYSE: COP), Marathon Oil (NYSE: MRO), Amerada Hess (NYSE: AHC), and Occidental Petroleum (NYSE: OXY), among others. The thaw resulted in part from Muammar Qaddafi’s change of heart on weapons of mass destruction. Nevertheless, Qaddafi is hardly completely “reformed”—the Libyan leader remains a dictator with a poor human-rights record. At the very least, though, by re-establishing relations, the United States stands a chance of helping to lift the living standards of the Libyan people.

The record of oil discoveries in Cuba is mixed. Petrobras (NYSE: PZE) tried and failed to find petroleum, while Canadian firm Sherritt International has had some success extracting low-quality crude. But the reality is that companies cannot afford to leave any stone unturned in their quest for new energy reserves. Unfortunately, though, this particular stone is off-limits to U.S. outfits, a fact that could redound to Repsol’s benefit. 

Fool contributor Brian Gorman is a freelance writer living in Chicago, Ill. He does not own shares of any companies mentioned here.

  1. Follow up post #1 added on July 07, 2004 by publisher with 3905 total posts

    Oil. In Cuba?

    Now you’re talking George Bush’ and Dick Cheney’ languange.

    Cuba consulting services

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