Oil exploration in Cuba expected to go ahead

Oil exploration in Cuba expected to go ahead
By Marc Frank in Havana
Published: August 29 2010 22:34

Preparations for full-scale oil exploration are gaining momentum in
Cuba's Gulf of Mexico waters just 50 miles from the US, testing the
limits of the trade embargo on the Caribbean nation.
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Cubapetroleo, the state oil monopoly, says seven exploration wells are
scheduled for the Cuban waters up to the end of 2012.

A new Chinese deep-water rig, owned by Saipem, a unit of Italian oil
company Eni SpA, is scheduled to leave its shipyard by the end of 2010
for the two-month trek to Cuba.

The rig was built to get around the 10 per cent limit on US technology
demanded under the US trade embargo of Cuba.

Preparatory work is moving ahead at Mariel, a port west of Havana, the
staging area for drilling operations, diplomatic and industry sources
said, and some companies have opened bidding for well casing.

"It is ridiculous that Repsol, a Spanish oil company, is paying an
Italian firm to build an oil rig in China that will be used next year to
explore for oil 50 miles from Florida," Sarah Stephens, executive
director of the Center for Democracy in the Americas, said.

Ms Stephens, whose Washington-based organisation opposes US sanctions,
led the first US energy-related fact-finding mission by congressional
staff and experts to Havana in July. They concluded Cuba was determined
to sink wells and with them the embargo.

Embargo opponents in Washington are backing legislation that would allow
US groups to participate in Cuba's offshore oil development, while
proponents plan legislation that would impose sanctions on the foreign
groups that do. Florida politicians, who have banned drilling off their
coast, and Cuban-American lawmakers, have raised fears of an accident
such as the one on BP's Deepwater Horizon rig. According to industry and
diplomatic sources, companies from Spain, India, Norway and perhaps
Malaysia – all US allies – have already contracted the rig, while
others, from Vietnam, Venezuela and Brazil are not far behind.

Russian and Chinese companies are negotiating to obtain offshore blocks
or partner with the other companies. Repsol drilled the only offshore
well in Cuba's waters in 2004. It said at the time that it had found
hydrocarbons, but not in a commercially viable amount. Since then,
according to Manuel Marrero Faz, oil adviser to Cuba's Ministry of Basic
Industry, extensive seismic work has revealed 15 sites with a high
probability of oil.

Mr Marrero estimates Cuba has up to 20bn barrels of oil in its offshore
areas, while the US Geological Survey puts the figure at a more modest
4.6bn barrels and 10,000bn cu feet of gas.

Cuba currently produces about 60,000 barrels of oil per day, all from
onshore wells. It imports about 115,000 b/d from ally Venezuela on
favourable terms.

The Obama administration has refrained from denouncing Cuba's drilling
plans and appears to favour limited co-operation.

The administration recently said it would allow US companies that handle
and clean up oil spills to operate in Cuban waters should the need arise
and granted approval for executives from the Houston-based International
Association of Drilling Contractors to visit Cuba last week. Lee Hunt,
association president, told the Financial Times he was impressed by
Cuba's preparations and regulatory regime, which included measures his
group had proposed to the Obama administration after the BP disaster.

He added: "There is one Gulf shared by three countries. We are promoting
co-operation between their industries to insure the unfortunate events
that occurred in Mexico and more recently in the United States do not
happen here".

Jorge Piñon, a visiting research fellow at the Cuban Research Institute
of the Florida International University, said more should be done to
wean Cuba from energy dependence on Venezuela and insure safety.

"The United States should enable oil companies working in Cuba access to
equipment and technology that would allow the monetisation of Cuba's
hydrocarbon resources in a safe and responsible manner," Mr Pinon added.

http://www.ft.com/cms/s/0/63317958-b3af-11df-81aa-00144feabdc0.html