2nd Cuban offshore oil well also a bust

Posted on Monday, 08.06.12

2nd Cuban offshore oil well also a bust
By PETER ORSI
Associated Press

HAVANA -- 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

http://www.miamiherald.com/2012/08/06/2935525/2nd-cuban-offshore-oil-well-also.html