Spain's Repsol begins Cuba offshore drilling-sources

Spain's Repsol begins Cuba offshore drilling-sources
ReutersBy Jeff Franks | Reuters – Thu, Feb 2, 2012

HAVANA (Reuters) - Spanish oil company Repsol YPF has begun drilling the
first well in Cuba's long-awaited exploration of offshore oilfields that
the communist country says hold both billions of barrels of oil and the
key to greater prosperity, industry sources told Reuters on Thursday.

The massive Scarabeo 9 drilling rig, which arrived in Cuban waters two
weeks ago, began drilling into the sea floor about 30 miles northwest of
Havana on Tuesday night, the sources said.

A Repsol spokesman said the company could not comment on "operational
details."

The newly built, high-tech rig is operating in 5,600 feet of water, or
what the oil industry calls "ultra-deep water," in the Straits of
Florida, which separate Cuba from its longtime ideological foe, the
United States.

Sources close to the project said such wells generally take about 60
days to complete.

Repsol, which is operating the rig in a consortium with Norway's Statoil
and ONGC Videsh, a unit of India's Oil and Natural Gas Corp, has said it
will take several months to determine the results of the exploration.

The well is the first of at least three that will be drilled in Cuban
waters with the Scarabeo 9, which was built in China and is owned by
Saipem, a unit of Italian oil company Eni.

Sources have said that Repsol will drill the first well and then the rig
will go to Malaysia's Petronas in partnership with Russia's Gazprom Neft
and then back to Repsol for the third well.

It is not clear what happens after that, although some sources have said
Repsol, which is leasing the Scarabeo 9 from Saipem at a rate said to be
more than $500,000 a day, will move the rig to Brazil for exploration there.

Cuba has said it may have 20 billion barrels of oil in its northern
waters, which are its part of the Gulf of Mexico. The U.S. Geological
Survey has estimated it may have 5 billion barrels of oil, but its study
does not include the entire Cuban gulf zone.

EASE FINANCIAL WOES

Cuba, which is in the midst of reforming its Soviet-style economy, is
hoping oil will ease it chronic financial woes and bring energy
independence from its socialist ally Venezuela. It receives about
115,000 barrels daily from the oil-rich South American country.

But if oil is found, experts say it could take five years or so to begin
production because more drilling will be needed and production
infrastructure put in place.

Repsol drilled the only previous offshore well in Cuba in 2004 and said
it found oil but that it was not "commercial."

It has been difficult to find a rig for more drilling because of the
50-year-long U.S. trade embargo against Cuba, which limits the amount of
U.S. technology that can be used.

The Scarabeo 9, which is of Norwegian design, has only one piece of
American equipment - the blowout preventer, a key part that failed in
the 2010 blowout of a BP well in the U.S. Gulf of Mexico.

The BP well, which was in more than 5,000 feet of water and spilled 5
million barrels of oil, stained hundreds of miles of U.S. coastline.

In Florida, 90 miles north of Cuba, the Cuba offshore project has raised
fears that a similar accident could damage the state's beaches and coral
reefs.

Drillers in Cuban waters could get within 45 miles of Florida, while in
the U.S. gulf no exploration is permitted within 125 miles of the state.

At Repsol's invitation, a team of U.S. experts inspected the rig in
December in Trinidad and Tobago and said it complied with all existing
engineering and safety standards.

But the United States, which has no official diplomatic relations with
Cuba, has only made safety preparations from afar and has not been
otherwise involved in the project.

Countries such as Norway and Brazil have helped lead an international
effort to get Cuba ready for oil exploration and the possibility of an
oil spill.

The project has gone forward despite opposition in the United States
from Cuban exile leaders, who have proposed legislation in the U.S.
Congress to try to stop Repsol.

They fear that oil will enrich and assure the survival of the Communist
government they have long opposed.

"We need to figure out what we can do to inflict maximum pain, maximum
punishment to bleed Repsol of whatever resources they have if there's a
potential for a spill that would affect the U.S. coast," U.S. Rep. David
Rivera from Florida told a congressional subcommittee in Miami on Monday.

(Additional reporting by Jane Sutton in Miami; Editing by Bob Burgdorfer
and Marguerita Choy)

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