Oil bonanza eludes Cuba after fresh tests

May 25, 2012 at 4:37 PM
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HAVANA, May 25 (UPI) -- Cuba is reportedly sitting on vast underwater oil and gas reserves, but none came up in the latest exploration, a joint Chinese-Spanish undertaking.

The Repsol initiative brought Chinese drilling rig operators into the play, but the outcome so far has been a dry well that has had to be abandoned.

More explorations will follow, as both Repsol and Chinese interests aim to expand their presence in Latin America and forge new partnerships in Cuba's slowly liberalizing economy.

Repsol has also secured partnerships in the venture with Norsk Hydro ASA, Oslo and ONGC Videsh Ltd., New Delhi, and Cuba's state company Cubapetroleo S.A.

Brazilian President Dilma Rousseff earlier secured several key contracts to gain a strategic position for the Brazilian energy sector and pledged a multibillion dollar investment program.

Repsol is aiming to expand its role in Cuba in preparation of a more relaxed business environment despite industry complaints the Cuban reform program remains beholden to communist ideals and has yet to encourage a significant number of international investors.

In contrast, the Chinese have joined veteran regional players Brazil and Spain in aiming for a "long game" with the hope of entrenching their interests before Cuba actually becomes a market economy.

Cuba is still under U.S. sanctions, the longest in history, but has thriving trade with most of its Latin American neighbors.

Repsol said poor results in the well exploration did not mean the project was abandoned. It was too early to determine the outcome and the company would take the next steps after a thorough investigation of the drilling outcome, Repsol sources said.

It was "not uncommon" to find four out of five offshore wells that were drilled to produce discouraging results, the sources said.

Cuba imports about half of its 200,000 barrels per day consumption from friendly countries, including Venezuela, but technical evaluation of the offshore resources has established Cuba is ripe for large-scale development of its underwater energy sector.

Cuban officials and analysts, quoted in the media, also said the government lacked a fall-back position to guarantee continued supplies if relations with Venezuela changed for the worse. Venezuelan President Hugo Chavez, an admirer of the Castro brothers, has been receiving cancer treatment in Cuba, a health issue that puts a question mark on Venezuela's political direction.

The Chinese participation in Repsol's exploration program was instigated by the need to circumvent the U.S. embargo on Cuba. The Scarabeo 9 Repsol oil rig has been drilling only about 50 miles from Key West, Fla.

Preliminary studies showed the waters may hold 5 billion to 20 billion barrels of crude oil equivalent.

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