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Third dry well dashes Cuba’s hopes for oil independence
CubaNews / August 2012

By Larry Luxner

Months of anticipation have turned into despair following the admission by Cuba’s state oil company Cubapetróleo (Cupet) that its Malaysian joint-venture partner, Petronas, had failed to find significant quantities of petroleum after exploratory drilling off the island’s Gulf of Mexico coast.

Cupet revealed Aug. 6 that the deepwater well drilled by Petronas in partnership with Russia’s Gazprom Neft had discovered hydrocarbons, but in a geological formation that was too tightly compacted for oil and gas to flow through it.

“It cannot be qualified as a commercial discovery,” the company said in a terse announcement published by the Communist Party newspaper Granma.

Energy expert Jorge Piñón told CubaNews he was taken aback by the revelation.

“I am surprised that will all the advanced technological experience of these companies, that they have not found oil,” he said. “These aren’t ‘Mickey Mouse’ firms. They’re experienced international energy conglomerates.”

Piñón, a University of Texas researcher who’s studied Cuba’s energy sector for years, estimates that foreign oil giants have poured over $250 million into petroleum exploration of Cuba’s waters since December 2000.

Half that amount has been spent by Spain’s Repsol alone, which in 2004 drilled its Yamagua-1 well to a depth of 11,188 feet (3,410 meters) but failed to come up with anything.

Earlier this year, Repsol — in partnership with Norway’s Statoil and a unit of India’s ONGC— halted all Cuba prospecting operations after its Jagüey-1 well came up dry at a depth of 15,750 feet (4,800 meters). That wellsite was located 22 miles north of Havana, and 55-60 miles south of Key West, Fla.

The Catoche-1 well, completed by Petronas on July 31, had been drilled west of Havana in 7,408 feet (2,258 meters) of water. Both companies had used the semisubmersible Scarabeo 9 — a 53,000-ton rig that costs roughly $511,000 a day to operate.

That rig now passes to Venezuelan state oil monopoly PDVSA, which plans to drill an exploratory well off Cabo San Antonio, at Cuba’s westernmost tip. It’ll likely remain in Cuban waters until October or November, Piñón said, then head for its next destination: Brazil.

Once the Scarabeo 9 exits Cuban waters, Piñón warned, “it’ll take foreign companies another 3-5 years to find a semi-submersible that meets the regulations of the embargo.”

He was referring to the fact that it was specifically built in China to comply with U.S. laws which stipulate that such equipment may consist of no more than 10% U.S. content.

There’s no question that oil prospecting is a trial-and-error endeavor, where a hit comes usually after several costly failures, especially in territories of such intricate geologic structure as in Cuba’s northwestern shoreline.

“Few people know this, but last year, 36% of all U.S. exploratory wells were dry holes,” said Piñón. “So the industry — particularly in new frontier areas like Cuba — still experiences a high rate of dry holes, even with all the advances we have in technology. So in deepwater drilling, it is not necessary ‘three strikes, you’re out.’”

Over the past few years, Cupet has encouraged international prospecting in the 59 blocks of its Economic Exclusive Zone (EEZ) — the Cuban-owned portion of the Gulf of Mexico (see map, page 10). Cupet has always talked boldly of big, large or simply giant oil and gas fields containing up to 20 billion barrels of recoverable reserves worth trillions of dollars at prevailing market prices.

If true, those reserves would rank Cuba 15th in global petroleum reserves — ahead of Algeria, Norway, Ecuador and Colombia — and up from its current 48th-place ranking. Not all specialists, however, are that enthused. The U.S. Geological Survey assesses Cuba’s potential petroleum reserves at just under 4.6 billion barrels, with a range of one billion barrels at 95% probability, and nine billion barrels at 5% probability.

In private, since they refuse to discuss their opinions publicly, Cuban geologists admit there’s a lack of information. They also say analogies between Cuba’s offshore zones and other promising oil fields in the Gulf of Mexico are misleading. At least some are downright skeptical when confronted with Cupet’s estimates of “giant” offshore oil and gas fields.

Those official Cuban assessments basically come out of hundreds of miles of seismic reflection surveying in the EEZ and onshore, over northern Cuba’s folded petroleum province — so far the most productive area — and another belt, the new frontier in Cuba’s oil exploration called the foreland basin.

Geologists’ attention is now focused on exploring the northernmost reaches of the folded belt and the foreland basin, which is a strip of land developed in a lithosphere flexure after the mid-Eocene period (the collision moment between Cuba and North America) and subsequently covered with thick sediments eroded from the island.

Hundreds of miles of seismic surveying in Cuba’s foreland basin have found offshore structures capable of trapping hydrocarbons. Drilling of Yamagua-1, Jagüey-1 by Repsol and Catoche in block N-51 — jointly owned by Petronas and Gazprom —presumably targeted these structures.

Yet Cuban oil extraction has always been in-sufficient to satisfy the island’s domestic needs, in spite of the 2003 record production of 3,679,800 tons or about 63,800 barrels a day — nearly 80 times higher than annual output in the 1950s.

Historically, the motivation for finding and extracting hydrocarbons in Cuba has been scarcity of crude oil imports. After 1991, when cheap Soviet oil vanished —unleashing the worst energy crisis ever — Cuba quickly turned to its own territory to find the needed resources, opening the sector to foreign in-vestment with rapid and encouraging results. In the first five years after this opening, petroleum output nearly tripled, and doubled again in another five years thanks to new oil discoveries and modern technology introduced to increase yields of existing oil fields.

Though these favorable conditions extend all along Cuba’s northern shoreline — an area known as the “folded belt” — the island’s most productive oil fields are along the north coasts of Mayabeque and Matanzas provinces. They occupy a narrow strip of land forming the Cretaceous Volcanic Arc, superimposed over sediments along the southern edge of the Florida and Bahamas platforms.

This is an ancient mega-collision zone that squeezed and shattered the rocks, which are usually found broken in stacked thrust sheets — as are roof shingles — that can potentially trap migrating fluids or gases from beneath.

The oldest fields are found on this strip at Bacuranao (1914), Motembo (1934) and Jarahueca (1940), though all them have long since been exhausted. Located here are also the newest and most productive fields: Guanabo-Boca de Jaruco (1968), Varadero-Cárdenas (1971), Seboruco, Puerto , Canasí, Santa Cruz and Majaguillar (1990s-2000s).

This territory accounts for 99% of Cuba’s oil production. As a portion of this structure extends below the sea floor, geologists are trying to reach offshore deposits with horizontal and inclined wells.

Interest in a second type of structure — the tectonic tertiary basins, which were the leading hope for finding oil in Cuba during the 1940s and 1950s — has faded significantly.

These basins are filled with virtually unaltered carbonaceous sediments up to 20,000-foot depths in some places. They are related to large faults that run diagonally through the island. There are nine basins of this type but only Los Palacios, at the western Pinar del Río province; La Trocha in central Cuba, and Guacanayabo at the east have been explored with limited results. The rest have never been considered worthwhile.

Drilling in these structures has been virtually fruitless, though small oil fields in La Trocha (the Cristales, Pina and Brujo oilfields) have been exploited for decades. Piñón pointed out that Cuba’s EEZ covers 150,000 sq kms, yet the three blocks in which the three unsuccessful wells were drilled represents less than 5% of that entire area.

“Disappointing yes, but there’s still much more work to be done,” he told CubaNews. “If we believe what the USGS says, the probability down the road is that Cuba will find oil.”

Armando H. Portela contributed to this story.

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