Cuba OKs Spain-Norway-India oil venture in Gulf

Cuba OKs Spain-Norway-India oil venture in Gulf
Wed May 10, 2006 6:04 AM IST
By Anthony Boadle

HAVANA (Reuters) - Cuba has struck a deal with Spanish, Norwegian and
Indian oil companies to drill in the mile-deep (1.6-km) waters of the
Gulf of Mexico, industry sources and diplomats said on Tuesday.

The possibility of striking oil in Cuban waters just 90 miles (120 km)
off U.S. shores at a time of soaring fuel prices and rising global
demand has set off a political debate over whether U.S. companies,
sidelined by American sanctions, should be allowed to explore there.

Contracts will be signed May 23 in Havana between Spanish major Repsol
YPF, Norway's Norsk Hydro and ONGC Videsh Ltd, the overseas arm of
India's state-owned Oil and Natural Gas Corp., they said.

Drilling will most likely not begin until 2008 due to a tight market for
deep-sea exploration rigs as the world's search for oil intensifies
under pressure from the high prices, one industry official said.

Repsol found good-quality light oil in Cuba's economic exclusion zone of
the Gulf of Mexico in 2004, but not in commercially viable quantities.

The Spanish company will complete seismic studies by the end of this
month to determine where next to drill with its two new partners, said
the official, who asked not to be named.

"There might be quite good opportunities for finding something, and
things would really change then. It's very exciting," a European
diplomat said.

The U.S. Geological Survey estimated last year that the North Cuba basin
could contain some 4.6 billion barrels of oil, with a high-end potential
of 9.3 billion barrels.

EMBARGO EXCEPTION SOUGHT

Complaining that energy-hungry China could gain access to oil "within
spitting distance" of the United States, Sen. Larry Craig, an Idaho
Republican, has introduced legislation that would seek an exception to
the trade embargo for U.S. oil companies so they could drill in Cuba.

U.S. companies are barred from exploring for oil in communist Cuba under
trade sanctions enforced against President Fidel Castro's revolutionary
government since 1962.

Legislators from Florida, where anti-Castro Cuban exiles have political
clout, seek to block Cuba drilling near the Florida coastline and
penalize executives of foreign companies that help Cuba look for oil and
gas.

Havana is eager to see American oil companies join forces with the
anti-embargo lobby led by U.S. farmers who have been selling food to
Cuba for four years.

Cuba invited U.S. exploration at a meeting with oil industry executives
in Mexico City in February.

"The purpose of the conference was to tell them we are open for business
as soon as the laws of their country permit," said Juan Fleites, general
manager of the Cuban state oil company CUPET.

Cuba produces 60,000 barrels per day of poor-quality oil and imports
about 90,000 bpd of oil and derivatives from its ally Venezuela.

China's giant oil and gas company Sinopec Corp. signed an agreement last
year to produce heavy oil with CUPET in Cuba's westernmost Pinar del Rio
province from on-shore wells.

China is renting towers for directional drilling in oil fields run by
Canadian companies Sherritt International and Pebercan Inc. along a
coastal oil belt producing heavy oil and gas used to generate electricity.

But China has no involvement in deep-sea exploration in the
43,250-square-mile (112,000-square-km) off-shore area Cuba opened up to
foreign exploration in 1999, divided into 59 blocks.

Sherritt has signed exploration contracts for four blocks, but is
waiting to see what Repsol discovers in its six blocks.

Industry experts said Cuba will have to find large deposits of light oil
to make it worthwhile extracting oil so deep under water.

http://in.today.reuters.com/news/newsArticle.aspx?type=businessNews&storyID=2006-05-10T054637Z_01_NOOTR_RTRJONC_0_India-248505-1.xml&archived=False