Bahamas and Cuba agree on maritime border


CubaStandard.com:

Cuba and Bahamas agreed “in principle” on a maritime boundary, the Nassau Guardian reported, citing Bahamas Minister of Foreign Affairs Brent Symonette.

Symonette said at a news conference that the boundary was finally established after a long 15-year dispute. He added that the countries, assisted by the United Nations, maintained an amicable and diplomatic relationship throughout the process.

The agreements come after four rounds of negotiations between the neighbors since 2005. A resolution became pressing as Norway’s Statoil is seeking to perform exploratory drills adjacent to the Bahamian side of the border. On the other side, Russia’s Zarubezhneft and Petrovietnam have leased onshore and nearshore blocks in east-central Cuba, also near the maritime border.

The Bahamian government announced a drilling moratorium following the BP spill in the Gulf of Mexico last year and is in the process of developing a disaster management policy. The Bahamas Petroleum Company — Statoil’s local partner — is optimistic drilling will begin in 2012.

A spill at the Statoil location could affect Cuban tourism ambitions in the Cayo Coco area. The Bahamas and Cuba have apparently not had talks about drilling safety and disaster response.

“The Bahamas should approach Cuba on this subject if it has not already done so,” a recent editorial of Bahamas newspaper Freeport News suggested. “The two countries should at least discuss the environmental consequences of drilling, the regulatory framework each should put in place regarding drilling and what response would occur if a disaster occurs. The Bahamas could even be a go-between between the U.S. and Cuba on the issue.”

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Cuba’s Hunt For Oil Raises Questions For U.S.


NPR: In the deep waters off Cuba’s north coast, a Chinese-built oil rig is due to begin drilling this fall in an area geologists believe may have huge beds of undersea crude.

A significant find could transform Cuba’s economy and possibly alter relations with the United States, but it may also present new environmental threats for the Florida coast.

Mariel — the town 30 miles west of Havanna that was a departure point for more than 100,000 Cubans who left the island in the 1980 Mariel boatlift — is being remade into a servicing hub for the Cuban oil industry of the future.

Crews there are working furiously to finish new port facilities and a railway with hundreds of millions in Brazilian financing.

This fall, the Spanish company Repsol plans to start drilling five exploratory wells in Cuban-controlled waters at depths up to 5,000 feet — about as far down as BP’s Deepwater Horizon rig.

U.S. trade sanctions against Cuba require the rig to contain no more than 10 percent U.S. technology, which has slowed its completion. Owned by an Italian company, the rig is now in its final construction phase and set to depart from Singapore in June.

A study by the U.S. Geological Survey estimates there are nearly 5 billion barrels of oil in the bedrock off Cuba’s north coast, enough to make the island a major energy player in the region. Cuba’s own geological studies show several times that amount.

Ricardo Torres, a Cuban economist who tracks the energy sector, says that thousands of jobs would be created if Cuba could go from being a net importer of energy to an oil exporting country, and other subsidiary industries could also arise. Even if it takes several years to bring the oil to market, new credit lines will open up for Cuba’s cash-strapped government, he says.

Pressure On The Embargo

What’s less clear is the impact a major discovery might have on the 50-year-old U.S. trade embargo. Those sanctions will keep American companies on the sidelines, but representatives from energy producing states have already proposed new exceptions to the embargo for U.S. oil industry firms.

Marc Frank, a reporter for the Financial Times in Havana who has been covering Cuba’s long search for domestic oil supplies, says it clearly would make the embargo less effective.

“And [it] adds an additional question to why that policy still exists,” he says. “What’s its purpose? So one would think it would lead to pressure towards changing that policy.”

Oil companies from Malaysia, Norway, India and several other nations have also signed exploratory drilling agreements, and Iran’s foreign ministry spokesman said during a Havana visit recently that his country stands ready to help.

Environmental Risk

Because the drilling will happen just 60 miles off the Florida coast, John McAuliff of the Fund for Reconciliation and Development, a group that advocates engagement with Cuba, says it’s in Washington’s best interest to work with Havana on contingency plans. After all, he says, the U.S. has the best cleanup technology and know-how.

“The question is how you minimize the risk, and there’s only one way to minimize the risk, and that is to have the kind of collaboration with Cuba that we have with Mexico or the Bahamas or any other country that is exploring for oil in a way that is potentially damaging to the U.S.,” McAuliff says.

At a U.S. government conference on safe drilling practices last month in Washington, Interior Secretary Ken Salazar called Cuba’s exploration plans “an issue of concern” that the Obama administration is watching closely. But Cuba was not among the dozen or so countries invited to the conference.

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Cuba to drill five new oil wells by 2013


HAVANA (AFP) – Cuba on Tuesday announced plans to drill five deepwater oil wells in the Gulf of Mexico beginning this summer, expressing confidence that its efforts will be rewarded with major new energy finds.

“We’re about to move to the drilling phase,” said Manuel Marrero, an official with the government authority tasked with overseeing Cuba’s oil sector.

“We’re all really hopeful that we will be able to discover large reserves of oil and gas,” said Marrero, who added that the ventures would be undertaken with the help of unspecified foreign companies.

He said the deepwater wells were to be drilled between 2011 and 2013, and would be in waters ranging in depth between 400 meters (a quarter mile) and 1,500 meters (1.6 miles). He did not specify which countries would be among the foreign partners working with Havana on the project.

Some studies estimate Cuba has probable reserves of between five and nine billion barrels of oil in its economic zone in the Gulf of Mexico. Cuban authorities have said their crude reserves are as high as 20 billion barrels.

In 2010, Cuba produced 21 million barrels of oil, about the same as it had extracted the previous year, representing a little less than half of its annual energy needs.

Cuba depends on Venezuela for the rest of its oil imports of about 100,000 barrels per day. Any cut to Venezuelan supplies could spell political and economic disaster for Havana.

The only one-party communist regime in the Americas, Cuba has long been plagued by energy dependence that amounts to its economic Achilles’ heel.

Havana used to depend on the eastern bloc for cut-rate oil, and plunged into economic chaos and blackouts when it was cut off after 1989.

Locking in energy independence, aside from potentially turning Cuba from a cash-strapped developing nation into a flush oil exporter, could help project its current regime years into the future.

On Monday, Rafael Tenrreyro, the head of state oil form Cupet’s exploration branch, said Cuba was anxiously awaiting a platform made in China for one of its offshore efforts.

“At some point this summer it should be getting here,” Tenrreyro told reporters, referring to the next few months’ time.

Despite the BP oil spill tragedy in the gulf, Tenrreyro insisted “safety is more than guaranteed. Cuban institutions have made sure that is the case.”

Cuba’s economic zone in the Gulf, just a stone’s throw from the US state of Florida, is divided into 59 blocs. Of those 20 are ventures with Repsol (Spain), Hydro (Norway), OVL (India), PDVSA (Venezuela), Petrovietnam and Petronas (Malaysia). Petrobras (Brazil) recently pulled out and Sonangol (Angola) recently signed on.

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Cuba’s Deepwater Oil Exploration Could Be a Game Changer See full article from DailyFinance: http://www.dailyfinance.com/story/cuba-deepwater-oil-exploration-game-changer/19865273/?icid=sphere_copyright


Dailyfinance.com:

People who follow the oil industry are closing watching a pair of news items, both involving drilling operations in the Gulf of Mexico.

Earlier this week, the Obama administration said Noble Energy (NBL) could restart drilling operations at its Santiago well in the Gulf. The announcement will make Noble the first company to resume drilling in the region since last April’s BP (BP) Deepwater Horizon disaster — and the first since the moratorium on deepwater drilling in the Gulf was lifted last October.

The other bit of news is that a semi-submersible oil rig, originally due to arrive in Cuban waters this month, will reportedly be delayed until late summer.

Working Around U.S. Trade Embargo

The rig is a multinational project: owned by an Italian oil service group, constructed by a Chinese firm and funded by a consortium led by the Spanish energy company Repsol (REP). The delay is being blamed on technical problems — but “part of the delays were originally that the [rig’s] works were going to have more than 10% of U.S. technology, which is not acceptable to the U.S.,” says Jonathan Benjamin-Alvarado, political science professor at the University of Nebraska at Omaha.

That 10% figure is a part of the U.S. trade embargo against Cuba, now in its sixth decade. But the possibility of a good-size oil find off the Cuban coast could be a major game-changer for both Havana and Washington.

A 2004 assessment by the U.S. Geological Survey reported that about 4.6 billion barrels of oil — as well as substantial deposits of natural gas — might lie trapped in the sediment just north of Cuba.

Some preliminary explorations of the site have shown promise, but the oil deposit is hardly a sure thing — especially since it’s in water even deeper than the BP Deepwater Horizon site. But given present concerns over oil supplies, “the idea is to eventually export [oil] in the area or for Cuban consumption,” says Arturo Lopez-Levy, a former political analyst for the Cuban government and now a research associate at the University of Denver.

Transitioning From Oil Importer to Exporter

“It could create a significant change in Cuba’s economic wherewithal,” says Benjamin-Alvarado, who recently co-authored a book on Cuba’s energy sector. He notes Cuba currently produces about 90,000 barrels of oil daily, or about half of its overall needs — with the rest being imported from Venezuela. But with the possibility of Cuba transitioning from an oil importer to a modest exporter, there’s been a dramatic increase in foreign direct investment in Cuba in recent years — as international companies invest in the country’s oil production infrastructure.

“About 88% of all the oil reserves in the world are already spoken for,” Benjamin-Alvarado says. “Only 11% are open and available for purchase by the international oil companies.” With that in mind, he says, “oil would solidify Castro’s effort to remain viable with the Cuban people, to satisfy their material needs. The Cuban people would take the trade-off. But over the course of 10 to 15 years, that may change.”

There are also some practical concerns about possibly having Cuban oil wells operating less than 90 miles from the Florida coast. A recent report by advocates for more U.S. engagement with Cuba suggests the U.S. government should start direct talks with Havana over energy and environmental issues — to prevent any future Deepwater Horizon-like spills in the Gulf.

That suggestion is getting a lot of push-back from anti-Castro groups in Florida, as well as state lawmakers. But according to the report, by the Center for Democracy in the Americas, the current trade embargo “restricts Cuba’s access to knowledge and associations that would help it plan for or react to a spill. The embargo prevents meaningful participation by U.S. private sector firms in planning for reaction, containment or remediation efforts.”

“The extent to which the U.S. can get on the stick and put forth a working agreement on environmental drilling will be very important, to be able to monitor very closely what the Cubans will be doing,” says Benjamin-Alvarado. “This won’t solve our energy problem, but it gives the U.S. an opportunity to have an imprint in the direction of the energy developments that are presently at play in Cuba.”

Arrival of Cuba offshore oil rig delayed again


HAVANA, Feb 22 (Reuters) – Delivery of a Chinese-built drilling rig that will open the first full-scale exploration for oil in Cuban waters looks unlikely until at least August in the latest delay to beset the project, sources said this week.

They said an inspection of the newly-built, high-tech rig had been ordered to make sure it was in good shape after taking on water in transit from the Chinese shipyard where it was built to Singapore for completion in October.

The rig — the Scarabeo 9, owned by Italian oil service firm Saipem SPLM.SI — had been expected to arrive in Cuban waters in late June or early July after several earlier delays postponed its original delivery date of September 2009.

If the inspection turns up problems that need repair, the latest delay could stretch beyond August, sources said.

The water problem was not considered a major issue, but an inspection was ordered to assure the rig’s overall quality, they said.

Once the rig gets to Cuba, it will be used by a consortium led by Spanish oil company Repsol YPF (REP.MC: Quote, Profile, Research, Stock Buzz) to drill one or two exploratory wells, then passed on to other oil companies for exploration in drilling leases they hold in Cuba’s part of the Gulf of Mexico.

Repsol drilled the only offshore well in Cuba in 2004 and found oil, but said it was “non-commercial.”

It has long planned to drill another well, but is widely believed to have had difficulty finding a rig that does not violate limits on use of U.S.-developed technology set by the 49-year-old U.S. trade embargo against Cuba.

Cuba, which depends on its socialist ally Venezuela for much of its oil, has said it may have 20 billion barrels or more of oil in its untapped oil fields.

The U.S. Geological Survey has estimated a more modest 4.6 billion barrels and 10 trillion feet of gas.

The Scarabeo 9 is a dynamic positioning, semi-submersible rig, meaning it floats partially submerged in the ocean and is kept in place by thrusters built into the platform.

It will be drilling in more than 5,000 feet (1,524 meters) of water, but is capable of working in depths of 12,000 feet (3,600 meters).

An August arrival would bring Scarabeo 9 to Cuba at the height of hurricane season, but the rig is built to withstand winds up to 115 miles per hour (185 km) and waves up to 88 feet (26.8 meters).

The prospect of offshore oil exploration by Cuba has prompted proposed legislation in the U.S. Congress that could penalize companies operating in the communist-led country or require them to prove they can adequately respond to an accident like last summer’s BP blowout in the U.S. Gulf of Mexico.

Cuba is just 90 miles (145 km) from Florida, but U.S. oil companies cannot operate there because of the U.S. embargo.

www.particularcuba.com

Cuba trades doctors for dollars


Globalpost.com:

HAVANA, Cuba — “$100 a barrel oil in sight,” read a recent headline in Granma, Cuba’s communist party newspaper, and not long ago, such news would likely have been followed by hand-wringing admonitions to conserve electricity or brace for transportation cuts and rolling blackouts.

Not anymore.Raul and Chavez

In today’s Cuba, climbing oil prices are channeling much-needed cash into government accounts, even though the island is years away from commercially developing its own offshore reserves or becoming a significant energy exporter.

Instead, Cuba is turning a tidy profit on other nations’ crude.

Over the past decade, in a feat of political and diplomatic ingenuity, Cuba’s leaders have transformed the country from a place hurt by high oil prices into one that rides their rise straight to the bank. Through service agreements that send Cuban doctors, nurses and other skilled professionals to energy giants like Venezuela, Angola and Algeria, the Cuban government is compensated on a sliding scale pegged to the price of oil.

The exact terms of those service contracts have not been made public, but the basic formula is that when energy prices go up, Cuba earns more. Last year, the island accumulated a $3.9 billion trade surplus, and services — such as health care — accounted for $9.4 billion out of $13.6 billion in total export revenue, according to the government’s National Statistics Office. Those earnings now dwarf Cuba’s traditional export commodities, such as sugar and nickel.

The added revenue is helping to ease the cash shortage that forced the Castro government to freeze accounts of foreign businesses operating in the country and defer payments on its estimated $20 billion in foreign debt. It has also provided a cushion to Cuban authorities at a time of economic tumult, as 500,000 state workers — 10 percent of the island’s workforce — are due to be laid off or reassigned in the coming months.

Analysts who track Cuba’s energy sector said the country’s increasingly lucrative service agreements are “a game changer.”

“Any exponential rise in oil prices will continue to increase export revenues,” said Jonathan Benjamin-Alvaro, a Cuba energy expert at the University of Nebraska at Omaha.

During the leanest years of the so-called Special Period, the post-Soviet economic collapse that gripped Cuba in the 1990s, frequent blackouts left Cubans simmering in their cramped apartments. The island had imported most of its fuel from the Soviet Union, and with the oil spigot shut off, Cuba’s power plants and transportation networks sputtered.

Today power outages are rare. And with help from foreign companies, Cuba now produces roughly 50,000 barrels per day of domestic crude to run its power plants. The island receives some 100,000 barrels from Venezuela as well, some of which is processed on the island and re-exported to other countries in the region through the Petrocaribe agreement.

Cuba’s most profitable service agreement continues to be with top ally Venezuela, where about 40,000 Cuban professionals are running health clinics, training athletes and working inside the Chavez government. While Cuban doctors and social workers have helped shore up political support for Chavez among Venezuela’s poor, Venezuelan hydrocarbons have helped pull the Castro government back from the brink of financial ruin.

The service arrangements have strained Cuban families and the island’s own health system, but Cuban workers typically welcome the chance to go abroad, even to faraway places like Qatar or Angola, since they can earn far more than the $20-a-month average salary they would get at home.

The island’s economic fortunes will be even more entwined with world energy prices in the coming years, as Cuba has signed more than a dozen deals with foreign companies to develop its offshore reserves. A sophisticated Chinese-built deepwater drilling rig is due to arrive into Cuban waters this summer, where a foreign consortium led by Spanish energy giant Repsol will try to tap undersea deposits that geologists believe hold billions of barrels of oil.

A large discovery will accelerate Cuba’s transformation from fuel-deficient importer to significant regional energy player.

The Venezuelan government has also invested more than $6 billion to upgrade Cuba’s Cienfuegos refinery, turning the southern port city into one of the region’s largest petrochemical centers. A similar expansion is also underway along Cuba’s north coast in Matanzas, and the two projects will more than double the island’s refining capacity.

Even with those projects years away from completion, economist Ricardo Torres said there’s no longer a sense of alarm in Cuba now when oil prices increase. But he cautioned that it’s difficult to calculate the exact benefit to Cuba, because the terms of its service contracts with foreign oil producers like Venezuela have never been disclosed.

There are other risks as well, he noted. “Those agreements were negotiated based on strong ties with those countries. But if you think of a situation in which one of those governments changes, Cuba will have to negotiate a new agreement. So it’s still vulnerable to political developments in those countries.”

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U.S. Denies Cuba’s Access to Oil Technologies


According to ACN: The process of drilling and extracting oil in Cuba is seriously affected by the United States economic, financial and commercial blockade which prevents Cuba from having access to the most advanced technologies in this field. Machinery, equipment or products with high percentage of components madeby U.S. companies or their subsidiaries can not be sold to Cuba, hence theneed to purchase them in farther markets which increases costs. General Director of the Oil Drilling and Extraction of the West Enterprise (EPEPO), Joel Pumariega told ACN that this unjust measure causes Cuba to disburse large amounts of money on the purchase of a product for the separation of water from crude oil.

Cuba used to buy that product from a Canadian company, but this one was bought by a US enterprise and therefore the sales were stopped. Its use in the industry is critical and influences the cost per ton of oil, he said. For Cuban facilities to obtain a similar product must buy it from distant markets, with the consequent delay in time, since this product is only bought when need it and in the exact amounts, he explained. Cuba is then forced to buy these equipments in third countries, where banks include the Cuba Risk factor in the loans, resulting in an increase. Next October 26 Cuba will introduce a resolution at the United Nations demanding the immediate end of the US economic war against it that has already cost it some 750 billion dollars in almost half a century.

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