Thursday, October 13, 2011

Arrival of Cuba offshore oil rig delayed again

Arrival of Cuba offshore oil rig delayed again
Wed Oct 12, 2011 5:22pm EDT

* Delay the latest of many in long-awaited project
* Opponents fear oil will prop up Cuba communism
* Project has raised environmental fears in Florida
By Jeff Franks

HAVANA, Oct 12 (Reuters) - The arrival of a Chinese-built drilling rig
set to explore for oil in Cuban waters has been delayed again and is not
expected to reach the island until the second half of December, sources
close to the project said.

The delay is the latest of many as communist-run Cuba awaits the start
of a project it hopes will give a shot in the arm to its struggling
economic system.

The massive Scarabeo 9, which set sail from Singapore in late August,
had been expected in Cuba by early November, but was slowed by problems
not unusual for a newly built rig going to its first drilling
operations, people close to the project said this week.

The late December arrival means the first well, to be sunk in 5,600 feet
(1,700 metres) of water off Cuba's northern coast, may not be started
until January, the sources said.

They warned that further delays were possible as the rig makes its
journey halfway around the world after it was built in Yantai, China,
and completed in Singapore. It was said to be currently off the coast of
West Africa, although reports about its location varied.

Cuba had hoped to begin exploring for oil in its part of the Gulf of
Mexico several years ago, but the project has been put off by
construction delays and other issues.

The high-tech rig belongs to Saipem, the offshore unit for Italy's Eni
SpA, and has been contracted by Spain's Repsol YPFfor the Cuba project,
which is the island's first major exploration offshore.

It will be used to drill at least three wells, two by Repsol in a
consortium with Norway's Statoila unit of India's ONGC, and another by
Malaysia's Petronas in partnership with Russia's Gazprom Neft.

After that, plans for the project, which has been cloaked in secrecy,
are not clear, but may depend on the success of the first three wells, a
diplomatic source said.

If oil is found, it will take at least three years to begin production,
said the local manager for one of the companies involved.


Cuban officials have not said much publicly about the offshore
exploration, but make it clear in private conversations that oil would
help their troubled economy.

Opponents of the Cuban government fear oil will be the salvation of the
communist system, which President Raul Castro is trying to preserve with
economic reforms. But that will depend in part on how much oil, if any,
is found.

Cuba has said it may have 20 billion barrels of oil in its 43,000 square
miles (111,370 square km) of the Gulf of Mexico, while the U.S.
Geological Survey has estimated 5 billion barrels, the figure more
broadly accepted in the oil world.

Cuba oil expert Jorge Pinon, a former president of Amoco Oil in Latin
America who is now at Florida International University, said the most
likely prospect if oil were found was that it would be a field closer to
the USGS estimate.

Owing to the fields and the probability they contain heavier oil, he
thinks only 30 percent to 40 percent of the reserves can be produced.

"If they find 5 billion barrels, you take 40 percent of that and it's 2
billion barrels," Pinon said.

The contracts with international partners call for Cuba to get 60
percent of the oil, which based on a 25-year reservoir life, would
equate to about 131,000 barrels a day.

That amount may or may not assure the survival of the Cuban system,
experts said, but would bring solid economic and political benefits,
including a better balance sheet for the cash-strapped island and oil

Cuba now gets 92,000 barrels a day from socialist ally Venezuela to help
meet internal demand, but Venezuelan President Hugo Chavez is battling
cancer, raising questions about how much longer the program will last.

The Cuban wells have raised environmental concerns because they will be
about 60 miles (96 km) from Florida, twice as close to the state as
drillers are allowed in U.S. waters.

A blowout like BP experienced last year off the coast of Louisiana could
douse both Cuba and Florida with oil.

To alleviate concerns, Repsol will follow through on an offer it made to
invite U.S. Coast Guard officials to inspect the rig when it reaches
Trinidad and Tobago, sources said.

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