Here is a no brainer: Drilling for oil is going to be a major theme for the GOP in this election.

Is China Drilling Off the Coast of Cuba?

There has been on going speculation over the last year that China is drilling for oil off the coast of Cuba. Recently Republican Florida Sen. Mel Martinez said China drilling off the coast of Cuba was just not so and was merely an urban legend.

So…which is it? Are they drilling or aren’t they? Since I don’t believe anything politicians say and half of what I read without investigating it to be true myself, I decided to do some research. Here is what I found.

In March 2004, China’s Petrochemical Corporation, Sinopec, signed a memorandum of understanding with Cuba’s national oil company, Cuba Petroleo or Cupet, to explore four oil blocks in Cuba. China’s Sinopec conducted six months of geological studies of the four Cuban blocks. This was the first attempt by Sinopec, China’s second largest oil and gas company, to enter oil and gas exploration and production in Cuba. It is important to also note the communist governments of China and Cuba owns these companies.

Approximately a year later in February 2005, China’s Sinopec signed an agreement with the Cuban government to jointly produce oil off the coast of Cuba.

So, basically what you have here is a production sharing agreement between Communist China government owned Sinopec and Cuba. Now for those of you who do not understand such business savvy terms, this basically means the Cuban government awards the execution of exploration and production activities to an oil company. In this case the company is Sinopec. The company bears the mineral and financial risk of the exploration and if successful, the company is permitted to use the recovered oil (cost oil) to pay all the expenses to recover it. All money after that (profit oil) is split between the government and the company at the rate agreed upon.

Here is some more information about oil exploration in Cuba. It is basically a timeline of energy news compiled from the World Security Institute. Here you will find not only is China dealing with Cuba, but so are places such as Canada, Brazil, Venezuela and Spain, to name a few.

Since we are focused on China, I have copied and pasted that information here.

January 31: Cuba and China signed a contract in Havana providing for the Asian giant's participation in extracting oil from a deposit off the island's north shore, the press reported. The deal is between Cubapetroleos and the Chinese oil company Sinopec, said the official daily newspapaer Granma. In December, Fidel Castro announced discovery of oil at a site offshore from Santa Cruz del Norte, some 55 kilometers (33 miles) east of Havana. The deposit is believed to hold some 100 million barrels of "light" crude, or the equivalent of 14 million tons. (EFE, Prensa Latina, 31/1/05)

February 8: China's oil giants began cultivating their virgin soil in Cuba. China Petroleum & Chemical Corporation (Sinopec), as the first comer, has inked a contract with Cuba Oil Company (Cubapetroleo) to jointly exploit oil in the Caribbean country. Under the terms of their contract, the two sides will join forces to prospect and exploit a potential oil-producing region. Chinese experts believe it is a significant beginning of the cooperation between China and Cuba in the petroleum industry. (SinoCast, 8/2/05)

March 22: Chinese oil drilling equipment has begun arriving in Cuba as state-run Cubapetroleo (Cupet) and its foreign partners prepare to significantly increase drilling along the northwest coast, industry sources said. "Four service units and a small rig have arrived and we are waiting for more," said a Cuban oil service manager, asking his name not be used. There are currently five rigs operating along the northwest heavy oil belt, an 80-mile (128-km) stretch of coast in Havana and Matanzas provinces from whence come all of Cuba's 70,000 to 80,000 barrels per day of heavy crude at 8 API to 18 API and with a high sulfur content. The poor-quality oil is burned in modified power plants and factories. Cuba imports a similar amount of oil and derivatives, with preferential financing from Venezuela. Canadian companies Sherritt International (S.TO) and Pebercan Inc. (PBC.TO), in conjunction with Cupet, account for 60 percent of the output, plus 2 million cubic meters of natural gas per day. (Reuters, 22/3/05)

April 6: The operator of China's second-largest Shengli oilfield is stepping up overseas exploration, spending more on such ventures this year as the world's No. 2 oil user grapples with falling reserves, officials said. Shengli Oilfield Administration Bureau, a unit of state-run Sinopec Group, will spend about $40 million drilling for oil and gas in Cuba, Iran and central Asia in 2005, company officials said. "This will be the heaviest spending in a year and we expect the pace to continue in the next few years," a Shengli executive told the press. Shengli, which is among the first Chinese companies to venture abroad, will sink a total of eight wildcat and appraisal wells this year, four in Kazakhstan, two in Iran, and one each in Cuba and Kyrgyzstan. (Reuters, 6/4/05)

November 24: PetroChina Great Wall Drilling Co., Ltd. and Petroleum Company of Cuba held a ceremony for signing two drilling service contracts on November 3, 2005. It is the second-time cooperation between Great Wall Drilling Co., Ltd. and Petroleum Company of Cuba after the signing of a one-year petroleum service agreement on one 1500HP drilling rig and one 2000HP rig on April 8 this year. The contract signed this time includes three 2000HP drilling rigs. The contract has a period of one year and a value of over US$24 million. The project will be launched in January 2006. (China Chemical Reporter, 24/11/05)

Then I also found some 2005 reports from the Energy Intelligence Group and the National Post’s Financial Post & FP Investing in Canada.

…China is seeking oil everywhere and Cuba is no exception. Three large Chinese companies, SINOPEC, Petro China and CINOOC - China National Offshore Corporation, are involved in a large agreement, perhaps already underway, for coastal and deep-water explorations. Most significant to this topic, especially in light of other Chinese investment in Cuba, is the fact that Sinopec, China’s second largest oil company, has stated a goal of helping boost Cuba's domestic oil production and producing 60% of its oil needs by 2006. (As best we can gather by extrapolating from various sources, the island is producing roughly 43-45% of its minimal needs today, thus 60% self-sufficiency by next year would be a tremendous aid for Cuba‘s desperate needs for energy, particularly electricity and gasoline.) Although Cuba's oil production is relatively tiny, it has managed to quadruple its production levels of 1990 to 71,000 in 2003 and increase that to 75.000 b/d in 2004, but the country needs 160,000b/d to function just minimally (source: Energy Intelligence Group, Inc. International Oil Daily, February 1, 2005).

Additional plans for exploration and development of other blocs of potential reserves were announced by two other Chinese oil companies, China National Petroleum Corp. and China National Offshore Oil Corp., after talks with CUPET, Cuba Petroleum, Some exploration will be in coastal regions but much, based on the better quality of the oil, will take place in off-shore deep waters (source: National Post's Financial Post & FP Investing [Canada], February 1, 2005, all but Toronto Edition).

So, Sen. Martinez may be right. China may not be drilling oil off the coast of Cuba. Not yet anyway…look folks, the point isn’t that China is not presently drilling for oil 50 to 90 miles off the coast of Florida, but the bigger picture and point is they can! And thanks to the United States Congress, we can’t!

Some politicians like Sen. Martinez would like to focus on what is happening instead of what could happen. They can drill, we can’t. They are planning to, we aren’t. Even the government educated dumb masses should be able to figure that out.

Nancy Pelosi and Democrats Slamming the Door on Domestic Drilling.

Looks like Nancy Pelosi and company have slammed the door on expanding our efforts to drill for oil anytime in the near future. Pelosi has decided oil companies can use the areas already approved for exploration, and calls the idea of drilling in areas protected “a hoax.” Well, I guess we better get use to these gas prices then.

This seems to be the new stance from the Democrats. “Instead of opening up new areas to exploration they should use the 90 million or so acres already available to them.” Yes, they are right, there are areas open to exploration, but the key word here is exploration. Just because you explore something doesn’t mean you actually find what you are looking for. Even Nancy Pelosi and friends should be able to realize that.

And in some areas there very well may be oil, but they are in depths or there are other logistical problems making extraction either impossible or not cost effective to pull it out of the ground. Look folks, there are other areas where oil can be extracted economically, but those are the areas democrats have placed a no trespassing sign on.

According to Nancy Pelosi, this is the entire problem is the republicans fault. She says efforts to expand drilling are “a decoy to punt attention away from the fact that [republican] policies have produced $4-a-gallon gasoline.”

Really??? Name me a policy Nancy? What policy would it be? The only policy I can think of is republicans caving to democrats when they had the majority.

Now, Pelosi is not a dumb lady…her stupidity on issues is underlined with ulterior motives. Pelosi and democrats know if the United States announced plans to open up ANWR, the Gulf Coast, oil shale lands in the west for oil exploration and recovery it is very likely oil prices would drop substantially.

OPEC nations would probably drop prices in hopes they could stall or stop the American drilling effort. Pelosi and democrats also know voters have a habit of attributing this kind of success or failure to the White House and they are not going to allow anything that would make a Republican look good, even if it means you have to pay five dollars a gallon for gas.

Senate Majority Whip Dick Durbin now says he is open to the idea of drilling oil and Harry Reid may support drilling as well. Their change of heart couldn’t be because of poll numbers and an election year, could it?

The debate on domestic oil drilling is heating up in the halls of congress. House Minority Leader John Boehner (R-Ohio) accused Democrats of “worshiping at the altar of radical environmentalism” in their drive to block access to domestic oil drilling.

Big T's Suggested Reading and Viewing from around the Web

Here is an article written by the President and CEO of the American Petroleum Institute, the trade association that represents America’s oil and natural gas industry, that should put to rest the assumption oil companies should simply drill on land already leased from the federal government. I think this guy knows a little something about it.

American Solutions petition to drill oil

Are you tired of paying $4.00 for a gallon of gas while congress points fingers at each other instead of working on a solution? I am and that is why I have signed Newt Gingrich’s Drill Here, Drill Now, Pay Less petition on the American Solutions website. I ask you to join more than 1 million Americans and sign it as well. Send a clear message to Congress that America wants to drill our own oil supply.

John McCain wants to lift the federal ban on offshore drilling and give the decision back to individual states to allow energy exploration. Wow…State’s rights…there is a concept not heard very often any more.

Big T's Suggested Reading and Viewing from around the Web.

We sit on an estimated 5.6 to 16 billion barrels of oil in ANWR and an estimated 60 trillion untapped cubic feet of natural gas off our coastlines. Yet we pay $4.00 gas and do nothing. Columnist Daniel Henninger wonders how long the US can remain a “serious country.” Excellent read.