Weekly Report - 15 November 2012 (WR-12-45)

CUBA | Oil efforts founder. On 9 November Cuba’s ministry of basic industries announced that the Scarabeo-9 deepwater rig would soon depart Cuban waters, having failed to find any oil in three prospective wells. The Chinese-built deep-water rig arrived in Cuba earlier in the year, contracted by the Spanish oil firm, Repsol. Optimism about Cuba’s oil potential rose after a report from the US geological survey suggested there could be between 5bn and 9bn barrels of recoverable oil in Cuban deep waters in the Gulf of Mexico, off the coast of western Cuba. The Cuban authorities have long had high hopes of exploiting these resources, allowing it to become energy independent, revive its stagnant economy and reinforce the power of the ruling communist regime. After drilling just one commercially viable well, Repsol gave up its exploration efforts with the Scarabeo-9, which costs US$500,000 a day to lease. The rig was then taken over by Malaysia’s Petronas, with no luck either. Finally, Petróleos de Venezuela (Pdvsa) took over the rig. However, on 2 November Pdvsa announced that the well it had drilled with the Scarabeo-9 was commercially unviable and that it would not drill any more. The Cuban ministry statement confirmed that the Scarabeo-9 rig had concluded its activities in Cuban waters and would be “leaving shortly”. “The Cuban oil dream is over and done with at least for the next five years” commented Professor Jorge Piñón from the Center for International Energy and Environmental Policy (CIEEP) at the University of Texas. Piñón, a Cuban-American, explained that while there is no doubt that there is oil in Cuba — noting that Russia’s Zarubezhneft has been contracted to drill new wells in shallower waters near Cayo Coco — the majority of it is in the deep waters of the Gulf. As the only rig in the world that currently complies with the US trade embargo on Cuba, the Scarabeo-9 represented a unique opportunity. Nevertheless, Piñón added that “If oil prices remain above US$100[a barrel] and if the industry develops new technology”, then major oil firms may consider returning to Cuba. Currently, oil firms from Vietnam and Angola still have active leases for oil exploration in Cuban waters.

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