2nd Cuban offshore oil well also a bust

AP News
Posted: Aug 06, 2012 1:25 PM
2nd Cuban offshore oil well also a bust

HAVANA (AP) — A second deep-water exploratory well in the Gulf of Mexico has proved a bust, Cuba's state oil company announced Monday, dealing another blow to the island's dreams of petroleum riches.

The drilling operation carried out by PC Gulf, a subsidiary of Malaysia's Petronas, and Gazpromneft of Russia, concluded July 31 off the western province of Pinar del Rio, Cuban state oil company Cubapetroleo said in a statement.

Analysis of the findings revealed an "active petroleum system that could extend to other parts of the four blocs contracted by PC Gulf and Gazpromneft, and even beyond their limits," read the statement, which was published by Communist Party newspaper Granma.

"Nevertheless, at that point the rocks are very compact and do not have the capacity to deliver significant quantities of petroleum and gas," it continued, "so it cannot be qualified as a commercial discovery."

Exploratory wells commonly turn out to be dry or not viable, and experts say production was always at least three to five years out from any confirmed strike.

Still, it was disappointing news for a cash-strapped country hoping for an economic lifeline, after another well sunk by Spanish company Repsol came up dry in May.

"A lot of people have been very naive in thinking that an oil-rich Cuba was going to materialize overnight, and that is not the case," said Jorge Pinon, former president of Amoco Oil Latin America and now an energy expert at the University of Texas. "You don't just turn the faucet on overnight."

An estimated 5 billion to 9 billion barrels of crude may be buried off Cuba deep below the Gulf of Mexico, according to geologic surveys, and authorities are hoping the reserves could be even bigger.

Cubapetroleo said PC Gulf and Gazpromneft will study the geologic information gained from drilling the 15,300-foot (4,666-meter) well to evaluate the potential of other parts of the four blocs they have contracted.

Ultradeep-water drilling is technologically challenging and extremely costly, with the platform that drilled out the two wells this year being leased out at $500,000 a day. In Cuba's case, just finding a suitable rig was a huge obstacle.

To comply with the 50-year-old U.S. embargo, Repsol and Petronas had to turn to the Scarabeo-9, a one-of-a-kind vessel built with less than 10 percent U.S.-made parts to avoid triggering sanctions.

After Repsol opted out of a contract to sink a second well and Monday's announcement of Petronas' failed try, the massive semisubmersible now passes to Venezuelan state oil company PDVSA for an attempt near the island's western tip.

Sonangol of Angola has an option to drill next, but after that the Scarabeo-9 is under contract to drill off Brazil with no word on when it might again be available to return to Cuban waters.

"The difficult part is that they're going to lose what I call 'the shovel.' Once the Scarabeo-9 finishes, that's it," Pinon said. "It's going to take a long time again for ... anybody else to drill additional exploratory wells."

In June, Russian company Zarubezhneft signed an $88 million, 325-day contract with Songa Offshore SE of Cyprus to rent out the Songa Mercur drilling rig for exploration off Cayo Coco, one of Cuba's leading tourist resort areas, beginning in late November.

But that bloc in the Bahamas Channel is relatively shallow, and Pinon said the Songa Mercur is not capable of the kind of ultradeep drilling required in the Gulf of Mexico, where nearly all Cuba's offshore exploration zones lie.


Follow Peter Orsi on Twitter at www.twitter.com/Peter_Orsi