What’s new in exploration

 Vol. 233 No. 5

Spanish oil company Repsol is drilling a well off the north coast of Cuba, and the reaction in the United States has been uniformly negative. South Floridians, already well compensated after the Macondo debacle, despite the fact that oil never reached their shores, are concerned about the environmental effects, if there is a spill in the Florida Straits. The Cuban Diaspora is irate that Fidel Castro’s government could profit from a successful exploration program. U.S.-based exploration and oilfield service companies are dismayed that they cannot participate in the play.

Geology. According to information provided to World Oil by Cuba’s Ministry of Basic Industry, Cuba produced 54,400 bopd in 2010 and 55,500 bopd in 2011, up from 14,500 bopd in 1988. Most was heavy, sour crude from the northern Matanzas province (onshore).

The U.S. Geological Survey estimates that there are 4.6 billion bbl of undiscovered oil reserves in the North Cuba thrust belt, which does not include the Eastern Gap area. Cuba’s state oil company, Unión Cubapetróleo (Cupet), estimates that Cuba’s offshore basins could contain more than 20 billion bbl. The country remains a net energy importer.

In 2004, Repsol drilled Yamagua-1, the first deepwater exploration well off Cuba. The wellsite was in a 5,446-ft (1,660-m) water depth, was drilled to 11,188 ft (3,410m), and found oil.

Jagüey prospect. Now, Repsol is drilling the first of several new wells in the North Cuba basin, in 5,300 ft of water, using Saipem’s new Scarabeo 9 semisubmersible. The Jagüey well was spudded in early February and will be drilled to more than 20,000 ft. The wellsite is 55 to 60 mi south of Key West, Florida, and 22 miles north of Havana.

Repsol has been in Cuba for more than a decade, after signing a JV agreement with Cupet in 2000. The company now has interests in six exploration areas covering 4,512 sq km off the north coast.

For the Jagüey well, Repsol is joined by two partners, Norway’s Statoil and ONGC Videsh, and says it will take several months to evaluate results when drilling is complete.

Catoche-1 prospect. After the current well is drilled for Repsol YPF and partners, the Scarabeo 9 will go to work for Malaysia’s Petronas in partnership with Russia’s Gazprom. According to an interview published in Gazprom Magazine, Dec. 14, 2011, Dmitry Borisov, Gazprom’s project manager in Cuba and Equatorial Guinea, said, “The Cuban [offshore] area is similar to the Black Sea offshore area… Within the area, there are 14 prospects, and the total reserves are estimated to be around 400–500 million tons of hydrocarbons. Catoche-1 is the easiest structure to understand in terms of geology, which is why we have decided to use it to drill the first well… If the drilling results confirm the oil deposit in Catoche-1, then we will start 3D seismic work to outline the structure and check its dimensions and resources…”

International effort. The 50-year-long U.S. trade embargo with Cuba limits the participation of U.S. companies and technology in the play. But it has not prevented international operators from proceeding with exploration off Cuba. The key to offshore exploration is marine seismic data. According to Repsol, a 3D seismic survey was acquired over 2,895 sq km in the North Cuba basin, from December 2005 to June 2006.

More recently, from March to June 2011, England’s MM-GEO Ltd. Co. participated in the acquisition of a 2D seismic survey and a wide-azimuth, 3D marine (WATS) seismic survey over Block L West (WH) for JSC Zarubezhneft, using the CGGVeritas vessels M/V Veritas Vantage and M/V CGG Princess. Saipem’s new Scarabeo 9 semisubmersible drilling rig arrived in Cuban waters in January.

The 53,000-ton rig is a sixth-generation, Frigstad D90 ultra-deepwater drilling unit, capable of working in water to 12,000 ft deep, and drilling to 50,000 ft. The rig structure was built at Yantai CIMC Raffles shipyard in China, where the mating of the hull and the 17,000-ton deckbox was the heaviest lift to date. The Scarabeo 9 was built to meet U.S. embargo requirements, which stipulate that there cannot be more than 10% US content.

In July 2010, Phillip J. Crowley, Bureau of Public Affairs for the U.S. Dept. of State, said that “U.S. oil spill mitigation service companies can be licensed through the Treasury Department’s Office of Foreign Assets Control (OFAC), to provide oil spill prevention and containment support to companies operating in Cuba… in order to minimize the risk to U.S. waters and shores.” Several companies have already received licenses.

Diplomacy. In 1977, under the Carter administration, the U.S. and Cuba delineated the international maritime boundary through the Florida Straits, a treaty renewable every two years. It was the first treaty concluded between the two countries since 1960 [the U.S. broke diplomatic relations with Cuba in 1961]. Under the treaty, Cuba has the right to explore in its exclusive economic zone, extending halfway into the Florida Straits, about 50 mi from its northern shoreline. A treaty is a written agreement between sovereign nations governed by international law.

Treaty conventions are codified by the Vienna Convention on the Law of Treaties (VCLT), known as the “Treaty of Treaties,” which began assembly in 1949, was adopted in 1969 and entered into force in 1980. The U.S. is one of 45 signatories but is not among the 35 states that have ratified the VCLT.

The central principle of treaty law is expressed in the maxim, pacta sunt servanda—“pacts must be respected.” So far, the current administration has done just that with regard to exploration in the North Cuba basin