Energy: Cuba's Oil Reserves Becoming As Valued As Its Cigars

Energy: Cuba's Oil Reserves Becoming As Valued As Its Cigars
By Patricia Grogg

HAVANA, Feb. 14, 2006 (IPS/GIN) -- The need to find new oilfields to
satisfy world demand, which could soon outstrip production, has prompted
foreign oil companies to take an interest in offshore prospecting and
drilling around Cuba.

According to predictions, global crude oil production is going to fall
in terms of both quantity and quality. By around 2015 demand will have
grown by about 60 million barrels a day above 2004 consumption levels,
which stood at 75 million barrels a day.

The Spanish-Argentine firm Repsol YPF was the first to take up the
challenge issued by the Cuban government in mid-1999, when it put out
for tender 59 blocks for oil exploration in an area of 112,000 square
kilometers within its exclusive economic zone in the Gulf of Mexico.

Repsol YPF has mining rights over six concession blocks with a total
surface area of 10,702 square kilometers, and did its first exploratory
drilling in mid-2004, at a depth of 3,410 meters.

The results only partially lived up to initial expectations, because
although the oil found was of high quality, the well was not considered
commercially viable. Previously, seismic tests had indicated that
Yamagua-1, the well drilled more than 30 kilometers from the north coast
of this Caribbean island, had a potential capacity of only 1.6 billion
barrels.

Repsol YPF is now gearing up to resume operations, in partnership with
Indian and Norwegian oil companies.

The Oil and Natural Gas Corporation of India confirmed that it will
participate -- through its international exploration arm ONGC Videsh --
together with Repsol YPF and the Norwegian firm Norsk Hydro, in
prospecting and drilling in Cuban waters.

ONGC Videsh and Norsk Hydro will each control 30 percent of the shares,
while 40 percent will remain in the hands of the Spanish- Argentine
company. According to experts, the involvement of the Norwegian company
is a sign of the seriousness of the prospecting enterprise.

India, which imports 70 percent of the oil it consumes, has also
negotiated separate concessions over two more oilfields in Cuba, as well
as agreements for prospecting and joint production of oil in Venezuela.
Venezuela supplies Cuba with approximately 90,000 barrels a day under
preferential payment terms.

Norway is one of the world's leading producers and exporters of crude
oil, ever since the discovery of large reserves off its coasts in the
1960s. It is also the chief source of natural gas in Western Europe.

China, whose fast-growing economy requires large imports of oil, and
which maintains close political and trade ties with the government of
Fidel Castro, has also been attracted by Cuba's oil prospects.

A contract signed last year by the state-run Cubapetroleo company and
the Chinese oil firm Sinopec, one of the world's 10 largest oil
companies, has paved the way for joint production in another of the
country's potential oilfields.

According to analysts, Asia's giant sees energy scarcity as one of the
greatest threats to its national security and social stability. Official
Chinese sources indicated that China imported 42.9 percent of the energy
it consumed in 2005, and forecast that this year the proportion would
rise to 44 percent.

Studies point to the existence of undiscovered reserves of approximately
4.6 billion barrels of oil and 9.3 trillion cubic feet of natural gas in
the Gulf of Mexico, an area shared by Cuba, Mexico and the United States.

The scent of a good business prospect that could be lost because of the
four-decade U.S. trade embargo against Cuba drew representatives of U.S.
companies to Mexico recently to meet with Cuban authorities and
Cubapetroleo executives.

The Feb. 2-4 meeting was attended by representatives of Valero Energy
Corp., Caterpillar Inc., the Texas Port of Corpus Christi, the Louisiana
Department of Economic Development, the Lafayette Economic Development
Authority, the National Foreign Trade Council and USA-Engage.

But the gathering was interrupted by the U.S. Treasury Department, which
ordered the management of the Maria Isabel Sheraton Hotel in Mexico City
to comply with U.S. legislation and expel the Cuban delegation from its
premises, thus delivering a clear message that the White House will
permit no cracks in the blockade.

The expulsion of the Cuban officials by a U.S.-owned hotel on Mexican
soil in accordance with a U.S. law sparked a diplomatic row.

All the signs indicate that the U.S. energy sector will have to wait for
the embargo to be lifted, or for political change in Cuba, as well as
moves by Washington to dislodge the foreign oil companies that are
already active in Cuba, should significant oil reserves be found there.

Cuba currently produces some 75,000 barrels of crude a day, covering
nearly half of total domestic consumption. The rest is imported from
Venezuela. About 95 percent of its domestic crude, which is very heavy
and has a high sulfur content, is pumped in an area located between
Havana and Matanzas, nearly 100 kilometers from the capital.

Also taking part in oil exploration in Cuba are Sherritt International
and Pebercan from Canada. In addition, Brazilian state- owned oil giant
Petrobras maintains a presence here in spite of the initial failure of
its oil prospecting.

Articles published on Peakoil.net, the Web site of the Association for
the Study of Peak Oil and Gas (ASPO), predict that global oil production
will peak in 2008, as demand continues to climb.

One of the problems that oil analysts point to is the marked reduction
in the rate of discovery of large oilfields. In 2000, 16 oilfields with
reserves of more than 500 million barrels were discovered. But in 2001
only eight were found, and in 2002 just three. Furthermore, it takes
several years to get a new field into production.

This means that one-third of world oil production presently comes from
oilfields where production is declining at a rate of approximately 4
percent a year, they report.
Story from REDORBIT NEWS:
http://www.redorbit.com/news/display/?id=391281

Published: 2006/02/14 21:00:21 CST