FRONTIER EXPLORATION Brighter license terms rekindle interest in Cuban coastal zones

Blocks currently on offer offshore Cuba. At a recent presentation in London, officials from state oil company Cupet and the Cuban Industry Ministry confirmed that the island's oil production was edging upwards to 30,000 b/d, thanks to a well workover program managed by foreign contractors. However, this translates as 1.5 million tons a year, which is just 20% of Cuba's annual needs. Meeting the import target remains a struggle, following the former Soviet Union's decision in 1989 to

Jan 1st, 1996

At a recent presentation in London, officials from state oil company Cupet and the Cuban Industry Ministry confirmed that the island's oil production was edging upwards to 30,000 b/d, thanks to a well workover program managed by foreign contractors.

However, this translates as 1.5 million tons a year, which is just 20% of Cuba's annual needs. Meeting the import target remains a struggle, following the former Soviet Union's decision in 1989 to drop subsidies on crude oil exports to the island.

To kickstart a new wave of exploration, more blocks have been offered around northern and southern Cuba along with new geophysical data and more attractive tax terms. Seven offshore blocks are now available, in tracts ranging from 1,400 to 6,000 sq km.

Production sharing contracts will be devised individually with the government, with a maximum duration of 2.5 years including an initial four-year period for exploration. However, most aspects will be negotiable with a good degree of flexibility, according to Juan Fleites, general manager of Comercial Cupet.

Under newly passed laws, no royalties will be charged, and the contractor will be able to open accounts in foreign currency in and outside Cuba to handle the proceeds from hydrocarbon sales: Cuba's national bank will guarantee exchange rates as fixed. Any oil from a PSC sold in Cuba will be paid for at international market prices, and there will be no tax on oil exports, Fleites said.

Cupet has also updated a 1992 report on the island's petroleum geology and hydrocarbon prospectivity, based on analysis of datasets acquired in the three years since. Packages are available for each block on offer, which comprise composite, wireline, and simplified stratigraphic well logs; shot point maps; and seismic, velocity, test, core analysis, and geochemical data. All can be viewed at Cupet's headquarters in Havana.

Seismic, drilling schedule

Before Canada NorthWest Energy's IX-Cupey discovery well in the Bay of Cardenas last year, there had been virtually no drilling performed offshore Cuba: prior to the foreign companies coming in, Cupet was constrained by lack of funds and outdated technology. However, with 11 foreign oil companies signed up on PSCs since 1990, the picture is slowly changing.

Guillermo Hernandez, Comercial Cupet's exploration manager, said that most of them have been engaged in seismic programs since 1993. To date 9,000 line km of 2D seismic and a 3D survey covering 190 sq km have been shot off and onshore Cuba, with 1,300 line km of 2D seismic shoots planned for 1996.

IX-Cupey, spudded in December 1993, encountered a large structure in the Placetas play at a T/D of 3,253 meters, testing 16 API oil at 3,750 b/d. "This well confirms the high possibilities of further discoveries in most blocks in the north with traps," Hernandez claimed.

Canada NorthWest will now drill an appraisal well in a similar play in the same Cardenas Bay Block 10 in 1996, he added, and Swedish company Taurus Petroleum will drill two wells in offshore Blocks 5and 7, partly to test an upper Cretaceous Eocene reef.

Having drilled two disappointing offshore wells last year off the north coast, with only shows of heavy oil, Total has reportedly stopped exploring in Cuba, although it is retaining an office in Havana.

Fleites said that oil companies (including two new to Cuba) were already negotiating for three of the current blocks on offer: one was very interested in exploring, he claimed. Manuel Marrero, head of petroleum exploration/production at the Industry Ministry, said that the offshore tracts were on average in 20 meters water depth. But Cuba has also signed the Law of the Sea, he stated, implying that exploration in future could extend to deeper waters.

Most hopes in Cuba have been pinned on fresh oilfields being discovered, but Marrero was also keen for gas to be found: "Cuba has a big electricity development - 95% of the population has electricity at home. If we find gas, we will think about using it in power stations." Seven large factories on the island are also potential gas customers, he said.

One perennial thorny issue, the rights of US oil companies with Cuban concessions prior to the revolution, was dismissed by Fleites. He pointed out that under the country's hydrocarbon law - ratified in 1938, 21 years before the revolutionary government came in - exploration concessions were given in Cuba only for a period of three years.

In 1960, the government nationalized the properties of various oil companies operating on the island, including some drilling equipment. "But it was impossible to nationalize the concessions," Fleites said, "as there was no property there to discuss: if the companies didn't make a discovery in their three years, the concession ended."

But American involvement can't be dismissed outright. It is rumored that US oil companies such as Amoco are keen to join the new wave of exploration in Cuba. A British oil company representative confirmed he had heard this report, too, but had not personally come across any Americans on the island.

Prominent names in attendance at the London meeting included BHP, Deminex, Elf, Enterprise Oil, Murphy Eastern, Repsol, and Teikoku.

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