Cuba Deep Water Wells May Boost Oil Output Six-Fold, Pinon Says

Cuban deepwater exploration projects that will begin this year have a high probability of success and may increase the island nation’s oil output by more than 500 percent, said Jorge Pinon, energy fellow at the University of Miami Center for Hemispheric Policy.

If successful, the new round of exploration may lead to production of 200,000 to 300,000 barrels of oil a day, Pinon said in an interview yesterday in La Jolla, California. Cuba imported 96,000 of oil a day in 2009 while it produced 47,500 barrels daily, according to a presentation from Pinon.

“The probability of success in finding hydrocarbons is great,” said Pinon, a former head of BP Plc’s operations in Latin America who recently visited Cuba. The communist nation would own about 60 percent of crude produced from projects resulting from the exploratory wells, he said.

The exploration projects will be the first conducted in Cuba since 2004 and they may start as soon as September, when the rig Scarabeo 9 is expected to arrive to the Caribbean island. The first project will be headed by Madrid-based Repsol YPF SA (REP) and Statoil ASA (STL) will also participate, Pinon said. The deepwater Cuban blocks to be explored are located about 60 miles south of Florida, he said.

The blocks are part of 22 concessions awarded by the Cuban government to foreign oil companies. In 2004, Repsol did not find enough oil in a deepwater project to make it commercially viable.

“The fact that five years after the 2004 non-successful exploration, Repsol and Statoil continue there is telling us there must be something there,” Pinon said. The next 18 months will be “key” for the exploration projects, he said.

Oil & Natural Gas Corp., India’s biggest energy explorer, Malaysia’s Petroliam Nasional Bhd., and Venezuela’s Petroleos de Venezuela SA are other companies that are involved in the seven upcoming exploratory projects.

Optimistic Scenario

Under an optimistic scenario, Cuba may produce enough oil to meet its own consumption needs, Pinon said.

The U.S. trade embargo on Cuba is a key reason why offshore drilling hasn’t developed in the communist island’s waters, the Cuban government has said. The embargo caps the amount of U.S. parts on any rig that may operate in Cuba at 10 percent.

The Scarabeo 9 platform being built by Italy’s Saipem SpA (SPM) is the only rig that complies with the U.S. embargo limits, Pinon said.

The U.S. Geological Survey estimates that Cuba’s North Basin region holds 4.6 billion barrels of oil, according to a 2004 report.

To contact the reporter on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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