Poor wells fade Cuba's hope for oil dollars

Poor wells fade Cuba's hope for oil dollars
The Associated Press

HAVANA – The only rig in existence that can drill in deep waters off
Cuba is preparing to sail away from the island, officials said Tuesday,
after the third exploratory well sunk this year proved nonviable in a
blow to government hopes of an oil bonanza.

While production was always years off even in the event of a big
discovery, analysts said the Scarabeo-9's imminent departure means
Havana's dreams of injecting petrodollars into a struggling economy will
be on hold indefinitely.

"Bottom line: This chapter is finished. Close the book, put it on the
shelf," said Jorge Pinon, a Latin America oil expert at the University
of Texas' Center for International Energy and Environmental Policy. "But
do not discard. Maybe there is a good ending to this story ... someday."

Geological surveys indicate that between 5 billion and 9 billion barrels
of oil may lie in deep waters off Cuban shores, but finding it has
turned out to be trickier than officials hoped.

The Scarabeo-9, a 380-foot-long, semisubmersible behemoth that leases
out for prices approaching a half-million dollars a day, steamed all the
way from Asia at tremendous cost to arrive in Cuba in January.

That was the only way companies could avoid sanctions under Washington's
50-year-old embargo against Cuba. The Scarabeo is the only rig of its
kind built with less than 10 percent American parts - an extreme rarity
in an industry where U.S. technologies play a major role.

An exploratory well sunk early this year by Spanish company Repsol
turned out to be commercially nonviable. After Repsol declined an option
to try again, the Scarabeo passed to a group led by Malaysia's Petronas,
which drilled its own dud. Cuban officials announced Nov. 2 that
Venezuela's PDVSA had also missed the mark.

For this baseball-mad nation, it was strike three.

Cuba's Ministry of Basic Industry, which oversees oil matters, confirmed
Tuesday that the rig is on its way out, with no word on when it might
return.

"The Scarabeo-9 will leave Cuba soon," it said in a brief statement
emailed to The Associated Press.

It referred questions about the platform's destination to owner Saipem
of Italy. Saipem's parent company Eni declined to comment, but various
reports have had it bound for Africa or Brazil.

Oil's existence off Cuba is not in doubt. Russian company Zarubezhneft
is contracted to use a different rig to drill in shallower waters off
Cayo Coco, a key Cuban tourist destination, later this month.

But the more promising deposits lie in the deep waters of the west. The
only way to get at them is to bring back the Scarabeo or build an
entirely new rig, and the three failed holes plus the ongoing hassle of
avoiding sanctions from the U.S. embargo will likely make companies
think twice.

Pinon noted that the Repsol and Petronas wells were not dry holes, only
that exploiting the oil there was not currently commercially viable due
to the structure of the ocean floor and the porosity of the rock.

"If oil continues at over $100 and if the industry continues to learn
and develop new technologies, they could probably come back to Cuba ...
and go for a second round," he said.

Cuban drilling in the Gulf of Mexico had raised fears in the United
States that a big spill could slick U.S. shores from the Keys to the
Carolinas.

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