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.

www.cubaluxuryrent.com

Advertisements

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.

www.cubaluxuryrent.com

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 readies to dive into offshore oil exploration


HAVANA (Reuters) – A Chinese-built drilling rig is expected to arrive in Cuban waters in early 2011, likely opening the way for full-scale exploration of the island’s untapped offshore fields.

Companies with contracts to search for oil and gas in Cuba’s portion of the Gulf of Mexico have already begun preparations to drill once the Scarabeo 9 rig gets to the communist-led island.

An official with Saipem, a unit of Italian oil company Eni SpA told Reuters Friday the massive semi-submersible rig should be completed at the Yantai Raffles shipyard in Yantai, China by the end of this year.

The journey to Cuba will take two months, and once it arrives it will be put into operation almost immediately, said the official, who asked not to be identified.

It will be used first as an exploratory well for a consortium led by Spanish oil giant Repsol YPF , which drilled the only offshore well in Cuba in 2004 and said at the time it had found hydrocarbons.

Cuba has said it may have 20 billion barrels of oil in its offshore, but the U.S. Geological Survey has estimated a more modest 4.6 billion barrels and 10 trillion cubic feet of gas.

Repsol has been mostly silent on the long delay in drilling more wells, but it is widely assumed in the oil industry it was due to the longstanding U.S. trade embargo against Cuba.

The embargo limits the amount of U.S. technology that can be used, which complicates finding equipment because U.S. companies have long dominated the offshore oil business.

Construction of the Scarabeo 9 was begun by Norwegian firm Frigstad Discoverer Invest Limited in 2006, but the company was purchased by Saipem in 2007. The rig was due to be completed by September 2009, but has been delayed because of modifications requested by Saipem, the Saipem official said.

PREPARATIONS UNDERWAY

The official said it was also slowed because the shipyard “had taken on too much work” with other projects.

Repsol is said to be planning at least one exploration well and possibly another. The rig will then be passed to other companies with contracts to drill in Cuban waters.

Cuba’s portion of the Gulf of Mexico has been divided into 59 blocks, of which 17 have been contracted to companies including Repsol, Malaysia’s Petronas Brazil’s Petrobras, Venezuela’s PDVSA and PetroVietnam.

Repsol is partnering with Norway’s Statoil> and ONGC Videsh Limited, a unit of India’s Oil and Natural Gas Corp.

Diplomats in Havana have said Malaysia’s Petronas will get the rig next, after Repsol completes its drilling.

Petronas, which has four exploration blocks, has conducted seismic work and built offices for a battery of employees who will come to Cuba for the project, sources said.

It also is talking to a possible partner in Gazprom Neft , the oil arm of Russian energy company Gazprom , whose chief told shareholders last month the company wants to join Petronas in the Cuba project.

ONGC Videsh, which has two blocks of its own, separate from its consortium with Repsol and Statoil, has already solicited bids for equipment including sub-sea wellheads and casing pipes for its planned exploration.

Russian oil firm Zarubezhneft has two nearshore blocks it said it plans to drill next year, but also has an agreement with Petrovietnam to participate in exploration of its three offshore blocks.

Zarubezhneft opened an office in Havana in June, according to Russian state news agency Ria Novosti.

A number of international oil service companies have solicited information about Cuban regulations on issues ranging from safety equipment to finance and taxes, diplomats said.

OIL SPILL CONCERNS

Cuba’s state-owned oil company Cupet has been silent about the offshore activity and rejected requests for interviews. A government official said the requests were denied because Cupet did not want to speak during the BP oil spill in the Gulf.

The spill has never reached Cuba, but it has heightened safety concerns both in the government and among oil companies with offshore blocks, sources said.

The prospect of drilling in Cuban waters has also raised pollution fears in Florida, which is just 50 miles away from the island’s maritime boundary.

The Saipem official said the Scarabeo 9, which is capable of operating in water depths up to 3,600 meters, is built to Norwegian standards, meaning it has extra equipment to shut off blown-out wells not required in the United States.

Due to the U.S. trade embargo, U.S. oil companies are not allowed to operate in Cuba.

Later this month a group from the Houston-based International Association of Drilling Contractors is scheduled to visit Cuba. The group has said it wants to discuss offshore safety issues with Cuban officials and get an overview of deepwater prospects.

Despite five decades of hostile relations, Cuba has said it would welcome the involvement of U.S. companies in developing its offshore fields.

Oil expert Jorge Pinon at Florida International University in Miami said U.S. oil service companies would like to enter the Cuban market because it is a new market close to home.

“For the U.S. offshore oil industry, Cuba is basically an extension of the Gulf of Mexico. It’s not like Angola — they can provide service from Houston or Freeport or Mobile.”

www.particularcuba.com

Cuba postpones plans to drill for oil again


Havana Journal:

Cuba and a consortium of foreign oil companies have again postponed plans to drill for oil in the island’s still-untapped oil fields in the Gulf of Mexico, diplomatic and industry sources said this week.

Cuba had announced the consortium, led by Spain’s Repsol-YPF, would drill in June or July, but now it is uncertain when work will begin in the waters that Cuban oil experts say may contain 20 billion barrels of oil.

Offshore Oil platform - particularcuba.com

Offshore Oil platform - particularcuba.com

“The project has been postponed until a further date for more study,” said a foreign oil industry source with direct knowledge of the plans. “It is premature to say when drilling might begin, later this year or next,” he added.

A European diplomat said he had first-hand knowledge that drilling was postponed at least until the end of 2009, if not into 2010. Neither source wished to be identified. Cuban authorities were not immediately available for comment.

Repsol drilled a test well 20 miles (32 km) off Cuba’s northern coast in 2004 and said it discovered traces of high quality oil, but that it was not commercially viable at the time. Since then, there have been several announcements that a second well would be drilled, but each time the project has been put off without explanation.

It was not clear if the latest postponement had to do with difficulties obtaining and moving a drilling rig, the cost of the project compared with the current price of oil, or other factors.

The US trade embargo against communist-run Cuba is said to be a factor in the repeated delays because of US regulations that threaten sanctions against companies doing business with Cuba if their drilling equipment contains more than 10 percent American technology.

Cuba has divided its share of the gulf into 59 blocks, 21 of which are already under lease to seven companies. Repsol has an agreement with Cuba’s state oil monopoly Cubapetroleo for exploration of six offshore blocks in partnership with Norway’s StatoilHydro and ONGC Videsh of India. PDVSA, the national oil company of Venezuela, has said it plans to sink its first exploratory well in Cuba’s offshore fields next year. Other companies with blocks are Vietnam state oil and gas group Petrovietnam, Malaysia’s state-run Petronas and Brazil’s Petrobras.

Manuel Marrero Faz, oil advisor to Cuba’s Ministry of Basic Industry, said earlier this year Cuba was in negotiations to lease another 23 blocks to firms including China National Petroleum Corporation, Angola’s national oil company and a Russian consortium.

Cuba says it produces the equivalent of 80,000 barrels a day of oil and gas, or about 50 percent of its energy needs. It depends on ally Venezuela for the rest. The US Geological Survey has estimated that Cuba’s offshore reserves are likely around 5 billion barrels of oil and 10 trillion cubic feet of gas. Cuba experts say their estimates are higher because they have more information about the geology of the region.

www.particularcuba.com – Online travel agency in Cuba

20bn barrel oil discovery puts Cuba in the big league


A worker walks at an oil rig in Havana, Cuba

A worker walks at an oil rig in Havana, Cuba. Photograph: Enrique De La Osa/Reuters

Friends and foes have called Cuba many things – a progressive beacon, a quixotic underdog, an oppressive tyranny – but no one has called it lucky, until now .

Mother nature, it emerged this week, appears to have blessed the island with enough oil reserves to vault it into the ranks of energy powers. The government announced there may be more than 20bn barrels of recoverable oil in offshore fields in Cuba’s share of the Gulf of Mexico, more than twice the previous estimate.

If confirmed, it puts Cuba’s reserves on par with those of the US and into the world’s top 20. Drilling is expected to start next year by Cuba’s state oil company Cubapetroleo, or Cupet.

“It would change their whole equation. The government would have more money and no longer be dependent on foreign oil,” said Kirby Jones, founder of the Washington-based US-Cuba Trade Association. “It could join the club of oil exporting nations.”

“We have more data. I’m almost certain that if they ask for all the data we have, (their estimate) is going to grow considerably,” said Cupet’s exploration manager, Rafael Tenreyro Perez.

Havana based its dramatically higher estimate mainly on comparisons with oil output from similar geological structures off the coasts of Mexico and the US. Cuba’s undersea geology was “very similar” to Mexico’s giant Cantarell oil field in the Bay of Campeche, said Tenreyro.

A consortium of companies led by Spain’s Repsol had tested wells and were expected to begin drilling the first production well in mid-2009, and possibly several more later in the year, he said.

Cuba currently produces about 60,000 barrels of oil daily, covering almost half of its needs, and imports the rest from Venezuela in return for Cuban doctors and sports instructors. Even that barter system puts a strain on an impoverished economy in which Cubans earn an average monthly salary of $20.

Subsidised grocery staples, health care and education help make ends meet but an old joke – that the three biggest failings of the revolution are breakfast, lunch and dinner – still does the rounds. Last month hardships were compounded by tropical storms that shredded crops and devastated coastal towns.

“This news about the oil reserves could not have come at a better time for the regime,” said Jonathan Benjamin-Alvarado, a Cuba energy specialist at the University of Nebraska.

However there is little prospect of Cuba becoming a communist version of Kuwait. Its oil is more than a mile deep under the ocean and difficult and expensive to extract. The four-decade-old US economic embargo prevents several of Cuba’s potential oil partners – notably Brazil, Norway and Spain – from using valuable first-generation technology.

“You’re looking at three to five years minimum before any meaningful returns,” said Benjamin-Alvarado.

Even so, Cuba is a master at stretching resources. President Raul Castro, who took over from brother Fidel, has promised to deliver improvements to daily life to shore up the legitimacy of the revolution as it approaches its 50th anniversary.

Cuba’s unexpected arrival into the big oil league could increase pressure on the next administration to loosen the embargo to let US oil companies participate in the bonanza and reduce US dependency on the middle east, said Jones. “Up until now the embargo did not really impact on us in a substantive, strategic way. Oil is different. It’s something we need and want.”

Guardian co.uk

www.particularcuba.com