RPT-Cuba plans 7 Gulf of Mexico oil test wells-US group

Tue Aug 17, 2010 9:54pm BST

Quotes

   

* Drilling of exploration wells scheduled over 2011-2012

* Estimates vary for Cuba's Gulf of Mexico oil reserves

* China-built rig expected on island by early 2011 (Repeats for broader distribution)

By Marc Frank

HAVANA, Aug 17 (Reuters) - Cuba plans to drill seven exploratory oil wells in its Gulf of Mexico waters over the next two years, according to a U.S. organization that visited the Communist-ruled island to discuss energy development.

Sarah Stephens, executive director of the Center for Democracy in the Americas, said meetings between energy experts she brought to the island in July and Cuba's state oil monopoly Cubapetroleo (CUPET) left no doubt about the Caribbean nation's determination to develop its offshore oil reserves.

"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 off the shores of Cuba," she told Reuters in a written response to questions.

"Whether it's available in commercially viable amounts we do not yet know. We were told by sources in Cuba that seven such wells will be drilled over 2011-2012. If this drilling finds significant oil, you could have production taking place as early as 2014 and as late as 2018," Stephens said.

Her non-profit group, based in Washington D.C., says it works to improve U.S. policy toward the Americas including Cuba. It opposes existing U.S. sanctions against the island.

Cuba's government has declared its interest in developing the country's offshore oil resources but rarely gives details of its plans in public.

The energy analysts on the trip to Havana included Michael A. Levi, Director of the Program on Energy Security and Climate Change at the Council on Foreign Relations, Ronald Soligo from Rice University, and Lisa Margonelli, Director of the Energy Policy Initiative at the New America Foundation.

Cuba estimates it has up to 20 billion barrels of oil in its offshore areas, but the U.S. Geological Survey has estimated a more modest 4.6 billion barrels and 10 trillion cubic feet of gas.

Mexico and the United States, which share the Gulf of Mexico with Cuba, have been producing oil and natural gas from under its waters for decades.

Cuba currently produces about 60,000 barrels of oil per day (bpd), all from onshore wells. It receives about 115,000 bpd from ally Venezuela on favorable terms.

OIL EXPLORATION MOVES

Speculation about Cuba's deep water exploration plans and statements concerning imminent drilling have increased since Repsol YPF (REP.MC) drilled the only offshore well in Cuba's untapped waters in 2004. It said at the time it had found hydrocarbons, but not in a commercially viable amount.

Industry sources blame delays in further oil development on problems with financing and fear of sanctions under Washington's 48-year-old trade embargo on Cuba, which also put a 10 percent cap on use of U.S. technology on the island.

But they say it appears serious exploration will finally get under way next year.

Part of Cuba's Gulf of Mexico zone is within 50 miles (80 km) of Florida, where U.S. politicians have raised fears that Cuban drilling could lead to an accident like the huge BP (BP.L) (BP.N) oil spill off the Louisiana coast.

Norway has been training Cuban personnel for offshore oil exploration for a number of years.

U.S. President Barack Obama's administration has said it would allow U.S. companies that handle accidental oil spills to operate in Cuban waters should the need arise.

The China-built drilling rig is expected to arrive in Cuban waters early next year and companies have begun preparations to drill once the Scarabeo 9 rig gets to the island.

Preparatory work was moving ahead at the port of Mariel, just west of Havana, the staging area for drilling operations, diplomatic and industry sources said.

Cuba has divided its share of the Gulf into 59 blocks, 21 of which are already under lease to seven companies.

Repsol has announced that its consortium with Norway's Statoil (STL.OL) and ONGC Videsh Ltd (ONGC.BO), a unit of India's Oil and Natural Gas Corp, will drill at least one well early next year. The Indian firm has started accepting bids to sink another well on two blocks it is exploring separately.

Diplomats in Havana have said Malaysia's Petronas (PETR.KL) is also planning to use the China-built rig.

Petronas, which has four Cuba exploration blocks, has conducted seismic work and built offices for a battery of employees who will come to Cuba for the project.

Venezuela's state oil company PDVSA has said it plans to sink its first exploratory well in Cuba's offshore next year.

Other companies with blocks there are Vietnam state oil and gas group Petrovietnam and Brazil's Petrobras (PETR4.SA), while firms from Russia, China and Angola are in the process of negotiating exploration rights. (Editing by Pascal Fletcher and Jim Marshall)