Chinese-built oil rig setting sail for Cuban waters

Fri Aug 26, 2011 1:09pm BST

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* Rig expected to arrive in Cuban waters in November

* Repsol to drill first wells soon after rig arrival

* Cuba says may have 20 billion barrels of oil offshore

By Jeff Franks

HAVANA, Aug 26 (Reuters) - A new, Chinese-built drilling rig was expected to depart Singapore on Friday or later this weekend on its way to Cuba where it will be used to usher in a new era in offshore oil exploration for the communist-led island.

The Scarabeo 9, owned by Italian oil giant Eni SpA's [ENI.MI) offshore unit Saipem [SPMI.MI] and contracted in Cuba by Spanish oil firm Repsol YPF [REP.MC], was anchored in Singapore and ready to leave on what an Eni spokesman said would be an 80-day voyage.

A Western diplomat in Havana said the rig would stop in South Africa and Brazil before reaching Cuba in November, with the expectation it will start drilling shortly after arrival.

Oil experts on the island say Cuba may have 20 billion barrels of oil in its still-untapped portion of the Gulf of Mexico, although the U.S. Geological Survey estimates reserves are a more modest 5 billion barrels.

Repsol drilled a well in Cuban waters in 2004 and found oil there, but for various reasons, including the longstanding U.S. trade embargo against the island, has not drilled again.

For Cuba, a big oil find will give its struggling economy a boost and reduce or eliminate its dependence on oil-rich leftist ally Venezuela, which ships 113,000 barrels a day to the island at reduced prices.

Opponents of the Cuban government fear that if significant oil reserves are discovered, it will only further entrench the communist system and its leaders.

Cuban President Raul Castro, 80, is in the midst of liberalizing the Soviet-style economy with the goal of assuring the survival of communism once he and his elderly leadership group are gone.

The Scarabeo 9, which has the latest technology and is capable of drilling in up to 12,000 feet (3,600 meters) of water, was built in Yantai CIMC Raffles Shipyards in Yantai, China, but after a number of delays was shipped to the Keppel FELS [KPLM.SI] shipyard in Singapore last fall for completion.

En route to Singapore, the rig took on water, which forced repairs and an extensive inspection to assure its seaworthiness.

Repsol, in a consortium with Norway's Statoil [STL.OL] and a unit of India's ONGC [ONGC.BO], is expected to drill one or two wells before passing the rig to Malaysia's state-owned oil company Petronas and then on the ONGC unit, ONGC Videsh, both of which have leased their own exploration blocks in Cuba's offshore.

Venezuela's PDVSA has said it plans to drill in Cuban waters within a year, while China's national oil company is considering whether to lease offshore blocks as well, a Cuban oil official recently told Reuters.

Cuban waters border the U.S. part of the Gulf of Mexico and that of Mexico, but U.S. oil companies are forbidden from working in Cuba due to the U.S. embargo put in place five decades ago with the aim of toppling Cuba's communist government. (Additional reporting by Stephen Jewkes in Milan and Marc Frank in Havana; Editing by Vicki Allen)

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