PETROLEUM: Spain’s Repsol to Drill in Cuban Waters

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Sep 4 2001 (IPS) - The Spanish petroleum company Repsol is to be the first transnational to drill for oil in the seabed of Cuba’s territorial waters in the Gulf of Mexico, an area divided among the Caribbean island, Mexico and the United States.

Repsol, which was granted exploration rights for six of the 59 blocks that Havana put up for bidding, plans to drill its first well next year, according to reports in Cuba’s state-run press.

The transnational company plans further to explore an area of 10,200 square km divided in six blocks, located along the island’s coast northwest of Havana, says the weekly business magazine ‘Negocios en Cuba’.

Repsol will provide all the start-up capital and, if the oil drilling proves successful, is to share the profits with Cuba.

The Cuban firm Unión Cubapetróleo (Cupet) is negotiating with four more petroleum companies about granting exploration rights for other blocks, said this week’s news reports, but did not offer details.

The Gulf of Mexico is thought to be one of the world’s greatest oil reserves, and the opening of Cuban waters there to foreign investment is feeding high expectations among petroleum transnationals.

With authorisation from the Cuban government, United States scientists drilled eight wells and found positive signs of major crude deposits, report local experts.

When it opened the bidding process two years ago, the Cuban Ministry of Basic Industry promised the potential oil partners compensation in accordance with the risks involved, as well as freedom to determine where the fuel would be sold, among other guarantees.

The state cannot assume the costs of exploration and drilling operations on its own, which prompted Havana to seek the participation of foreign companies, explained Cupet vice-president Juan Fleites Melo at the time.

The area Cuba wants to explore, with the involvement of the private sector, is its own exclusive economic zone in the Gulf of Mexico, which covers 112,000 square km. The government has broken down the area into 59 blocks, each one covering approximately 2,000 square km.

It is possible with current technology to drill for crude at sea depths of up to 2,000 metres, but experts believe that within seven or eight years the industry will be able to extract petroleum at depths of 3,500 metres.

Cuba opened its petroleum industry to foreign investment in 1991, which has allowed this socialist-run island to maintain a constant rise in oil production.

To date, concession on 20 of Cuba’s 59 blocks in the Gulf of Mexico have been granted to companies from Britain, Canada, France, Spain and Sweden, among other countries.

Exploration efforts are being focussed along the “northern band,” an area that extends from Guanabo, in Havana province, to Corralillo, 150 km to the east. It is believed to hold the highest potential for oil output in Cuban territory.

More than 90 percent of Cuba’s oil comes from the oil deposits of the northern coast, which produce a heavier, high-sulphur crude. Most of this output is used by local industry in specialised plants for the production of electricity, cement and nickel.

Last year, however, the state-owned Brazilian oil giant Petrobrás reported that it had failed in its attempts to find crude in another nearby area, located north of Ciego de Avila, 506 km east of Havana. The company has yet to decide whether it will continue its partnership with Cupet.

Cuba currently produces some 60,000 barrels of petroleum a day, which covers a third of the consumption of this country of 11 million people.

Approximately another third is imported from Venezuela, providing 53,000 barrels daily, according to a trade agreement in effect since last October. The rest of Cuba’s needs are met through purchases from international companies.

The oil agreement between Havana and Caracas stipulates that Cuba pays for 80 percent of the Venezuelan crude at international market prices within 90 days of delivery.

The period for payment on the remaining 20 percent is up to 15 years, and can be met with goods and services – such as the provision of medical technology, training and assistance to Venezuela.