Wednesday, August 18, 2010

Cuba plans 7 Gulf of Mexico oil test wells - U.S. group

Cuba plans 7 Gulf of Mexico oil test wells - U.S. group
Wed Aug 18, 2010 2:30am IST
By Marc Frank

HAVANA (Reuters) - Cuba plans to drill seven exploratory oil wells in
its Gulf of Mexico waters over the next two years, according to a U.S.
organization that visited the Communist-ruled island to discuss energy

Sarah Stephens, executive director of the Center for Democracy in the
Americas, said meetings between energy experts she brought to the island
in July and Cuba's state oil monopoly Cubapetroleo (CUPET) left no doubt
about the Caribbean nation's determination to develop its offshore oil

"Repsol, a Spanish oil company, is paying an Italian firm to build an
oil rig in China that will be used next year to explore for oil off the
shores of Cuba," she told Reuters in a written response to questions.

"Whether it's available in commercially viable amounts we do not yet
know. We were told by sources in Cuba that seven such wells will be
drilled over 2011-2012. If this drilling finds significant oil, you
could have production taking place as early as 2014 and as late as
2018," Stephens said.

Her non-profit group, based in Washington D.C., says it works to improve
U.S. policy toward the Americas including Cuba. It opposes existing U.S.
sanctions against the island.

Cuba's government has declared its interest in developing the country's
offshore oil resources but rarely gives details of its plans in public.

The energy analysts on the trip to Havana included Michael A. Levi,
Director of the Program on Energy Security and Climate Change at the
Council on Foreign Relations, Ronald Soligo from Rice University, and
Lisa Margonelli, Director of the Energy Policy Initiative at the New
America Foundation.

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

Mexico and the United States, which share the Gulf of Mexico with Cuba,
have been producing oil and natural gas from under its waters for decades.

Cuba currently produces about 60,000 barrels of oil per day (bpd), all
from onshore wells. It receives about 115,000 bpd from ally Venezuela on
favorable terms.


Speculation about Cuba's deep water exploration plans and statements
concerning imminent drilling have increased since Repsol YPF drilled the
only offshore well in Cuba's untapped waters in 2004. It said at the
time it had found hydrocarbons, but not in a commercially viable amount.

Industry sources blame delays in further oil development on problems
with financing and fear of sanctions under Washington's 48-year-old
trade embargo on Cuba, which also put a 10 percent cap on use of U.S.
technology on the island.

But they say it appears serious exploration will finally get under way
next year.

Part of Cuba's Gulf of Mexico zone is within 50 miles (80 km) of
Florida, where U.S. politicians have raised fears that Cuban drilling
could lead to an accident like the huge BP oil spill off the Louisiana

Norway has been training Cuban personnel for offshore oil exploration
for a number of years.

U.S. President Barack Obama's administration has said it would allow
U.S. companies that handle accidental oil spills to operate in Cuban
waters should the need arise.

The China-built drilling rig is expected to arrive in Cuban waters early
next year and companies have begun preparations to drill once the
Scarabeo 9 rig gets to the island.

Preparatory work was moving ahead at the port of Mariel, just west of
Havana, the staging area for drilling operations, diplomatic and
industry sources said.

Cuba has divided its share of the Gulf into 59 blocks, 21 of which are
already under lease to seven companies.

Repsol has announced that its consortium with Norway's Statoil and ONGC
Videsh Ltd (ONGC.BO), a unit of India's Oil and Natural Gas Corp, will
drill at least one well early next year. The Indian firm has started
accepting bids to sink another well on two blocks it is exploring

Diplomats in Havana have said Malaysia's Petronas is also planning to
use the China-built rig.

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

Venezuela's state oil company PDVSA has said it plans to sink its first
exploratory well in Cuba's offshore next year.

Other companies with blocks there are Vietnam state oil and gas group
Petrovietnam and Brazil's Petrobras while firms from Russia, China and
Angola are in the process of negotiating exploration rights.

(Editing by Pascal Fletcher and Jim Marshall)

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