Oil well in Cuba comes up dry, raises questions about future exploration

Posted on Saturday, 05.19.12


Oil well in Cuba comes up dry, raises questions about future exploration

After reporting that it found no oil in its well in Cuba, Repsol will
likely now consider leaving the country.
By Juan O. Tamayo
jtamayo@ElNuevoHerald.com

Cuba's dreams of an oil bonanza suffered a tough but possibly temporary
setback Friday when the Spanish Repsol company confirmed it hit a dry
hole when it drilled a well off the island's northwest coast.

The dry well will put more pressure on Cuba's dependence on Venezuelan
oil and means the government of Raúl Castro needs to continue nurturing
its tight relations with the ailing president of Venezuela, Hugo Chávez,
one analyst said.

The development also may temporarily allay fears of an oil spill in
Cuban waters that could foul the Florida Keys and the U.S. eastern
seaboard, although several other foreign oil companies have options to
explore in Cuban waters and Repsol had contracted to drill a second
exploratory well.

Repsol spokesman in Kristian Rix confirmed to journalists in Havana
Friday that the Scarabeo-9 floating drill platform found nothing in a
well in more than 6,000 feet of water about 20 miles northwest of
Havana. The well will be capped, he added.

The announcement was a tough blow to Cuba's hopes for finding crude that
could fuel its anemic economy.

Jorge Piñon, a University of Texas oil expert who keeps an eye on Cuba,
said the dry hole was not surprising because such things can happen, yet
surprising because modern technology has significantly increased the
chances of hitting oil.

A key question now, Piñon added, is whether Repsol, already battered by
the Argentine government's nationalization of its YPF branch earlier
this month, will decide to cut its risks and leave Cuba for more
productive areas.

The dry hole also will put more pressure on Castro to ensure a
continuation of the ultra-close relations with Venezuela, which ships an
estimated 110,000 barrels a day to Cuba, part of it for the domestic
market and part for refining and export to Caribbean nations.

Chávez, a socialist who all but worships former Cuban leader Fidel
Castro, has admitted that he is fighting cancer and has been
unofficially reported to be terminally ill, though the details of his
health remain a state secret.

With the announcement of the dry well, "the question of their reliance
on Venezuelan oil has become more urgent than ever for Cuban officials,"
Piñón told El Nuevo Herald in a telephone interview.

Drilling the well cost an estimated $100 million to $150 million,
financed by a consortium made up of Repsol, Norway's Statoil and ONGC,
an Indian oil company, Piñón noted. Repsol owns 40 percent of the
partnership, so it will be hit with that portion of the losses.

A report by the U.S. Geological Survey estimated the area northwest of
Cuba may hold up to 5 billion barrels of crude, yet the Cuban government
has put the estimates as high as 20 billion, and commissioned studies on
how it should handle the windfall.

Cuba is not only planning how to spend its winnings in the oil lottery
before a number is drawn, it hasn't even bought a lottery ticket yet,
joked one U.S. oil expert.

The Scarabeo-9 rig, owned by an Italian firm and built in China with few
U.S. parts specifically to avoid U.S. embargo regulations, is now
expected to drill further west off the coast of Pinar del Rio on behalf
of a consortium of Malaysia's Petronas and Russia's Gazprom Neft companies.

Venezuela's state-owned PDVSA oil company may get the rig afterwards for
a third exploratory well, according to a dispatch from Havana by the
Reuters news agency, which broke the dry-well story.

Repsol found oil in an offshore well drilled in 2004, but described the
strike as "not commercial." It began drilling the latest well in
January, and the Scarabeo-9 platform was believed to have been moved
away from the dry well this week.

Piñón said he had little doubt that oil exists in the areas, but that
even if the Petronas-Gazprom consortium finds commercial quantities of
crude, it would take at least two years and more likely five to develop
full-scale production.

Repsol's oil exploration in waters only about 70 miles from Key West had
triggered concerns that a spill would send crude washing up along the
ecologically fragile Florida Keys and the bays and inlets along the
eastern coast of the United States. Repsol's well was in water deeper
than the Deepwater Horizon blowout in the Gulf of Mexico in 2010.

South Florida Republican Rep. Ileana Ros-Lehtinen said Friday that the
dry well "is a blow to the (Castro) dictatorship's desperate search for
sources of revenues other than the billion-dollar oil subsidies it
receives from fellow tyrant Hugo Chavez.

"Unfortunately, the Cuban people are not yet out of the woods as
(Petronas and Gazprom-Neft) … are next in line to use the oil rig to
rape and pillage Cuba's natural resources," she added. "These companies
don't care about the suffering of the Cuban people. Their main concern
is profits and their bottom line."

http://www.miamiherald.com/2012/05/19/2806532/oil-well-in-cuba-comes-up-dry.html