Russian oil company suspends exploration in Cuba

Posted on Friday, 05.31.13



Russian oil company suspends exploration in Cuba

By Juan O. Tamayo

jtamayo@ElNuevoHerald.com



A Russian state oil company drilling off Cuba's northern shores has

reportedly confirmed that it is temporarily halting its exploration —

the fourth disappointment for Cuba's dreams of energy self-sufficiency

in less than two years.



The announcement by Zarubezhneft signaled an end to the only active

exploration program on the island, which now relies on highly subsidized

oil from the beleaguered Venezuelan government of President Nicolas Maduro.



Zarubezhneft confirmed this week that it was halting work due to

"geological" problems but added that it will resume its exploration next

year, the Reuters news agency reported Thursday in a dispatch from Havana.



The Russians withdrawal had been expected because the Norwegian company

that owns the drilling platform they have been leasing, the Songa

Mercur, already had announced that it would be leaving Cuban waters in

July for another contract.



Zarubezhneft's confirmation, nevertheless, signals "another

disappointment" for Cuba's dreams of finding oil in its waters, said

Jorge Pinon, a Cuba energy expert at the University of Texas in Austin.



The U.S. Geological Survey has estimated that Cuba's offshore waters

have "significant undiscovered conventional oil potential" — between 4.6

billion and 9.3 billion barrels. Cuban officials estimate the potential

reserves at 20 billion.



"This is the second geological area in Cuba that … seemed to be

promising," Pinon said of Zarubezhneft's exploration block. But finding

the oil means "you have to go into your pocket to drill exploratory wells."



Spain's Repsol oil company spent $100 million in the early part of 2012

unsuccessfully exploring with the Scarabeo 9 drilling platform,

especially built in China to avoid the restrictions of the U.S. embargo,

in deep waters northwest of Havana.



Petronas of Malaysia, Russia's Gazprom and Petroleos de Venezuela SA

(PDVSA) later leased the Scarabeo platform but also struck out, and the

rig left Cuban waters at the end of last year.



Zarubezhneft then gave it a try, leasing the Songa Mercur to explore

waters not as deep and east of Havana starting late last year.

Neighboring Bahamas also has expressed interest in that area, but the

Russians also drilled a dry hole.



The Russians are considered likely to meet their promise to return next

year because President Vladimir Putin's government has been pushing hard

to warm up political and commercial ties with Moscow's one-time allies

in Havana.



Cuba's oil explorations have caused concern among U.S. environmentalists

and tourism officials that any spills would impact the entire Eastern

Seaboard, from the Florida Keys to Cape Cod in Massachusetts.



Supporters of improving U.S. relations with Cuba argued that Washington

should allow American oil firms to get a piece of the potential profits.

The U.S. embargo adds about 20 percent to that island's exploration

costs, according to Cuban officials



Repsol publicly allowed U.S. officials to inspect the Scarabeo rig

before it reached Cuban waters. Zarubezhneft privately allowed the U.S.

inspectors to examine the Songa Mercur, according to some reports.



Zarubezhneft's announcement means that for at least the next couple of

years Cuba will have to continue relying on the estimated 96,000 barrels

of oil it receives each day from Venezuela – about two thirds of its

consumption.



Under highly advantageous deals signed by the late President Hugo

Chávez, Cuba pays for part of the already subsidized oil with the vastly

overpriced salaries that Venezuela pays for the 45,000 medical and other

personnel working in the South American country.



Maduro has promised Cuba that he will continue the subsidies, but

Venezuela's oil production has been shrinking, its economy is in turmoil

and the president's political rivals are pushing for his removal.



http://www.miamiherald.com/2013/05/31/3424471/russian-oil-company-suspends.html