Oil well in Cuba comes up dry, raises questions about future exploration

Cuba’s dreams of an oil bonanza suffered a tough but possibly temporary setback Friday when the Spanish Repsol company confirmed it hit a dry hole when it drilled a well off the island’s northwest coast.

The dry well will put more pressure on Cuba’s dependence on Venezuelan oil and means the government of Raúl Castro needs to continue nurturing its tight relations with the ailing president of Venezuela, Hugo Chávez, one analyst said.

The development also may temporarily allay fears of an oil spill in Cuban waters that could foul the Florida Keys and the U.S. eastern seaboard, although several other foreign oil companies have options to explore in Cuban waters and Repsol had contracted to drill a second exploratory well.

Repsol spokesman in Kristian Rix confirmed to journalists in Havana Friday that the Scarabeo-9 floating drill platform found nothing in a well in more than 6,000 feet of water about 20 miles northwest of Havana. The well will be capped, he added.

The announcement was a tough blow to Cuba’s hopes for finding crude that could fuel its anemic economy.

Jorge Piñon, a University of Texas oil expert who keeps an eye on Cuba, said the dry hole was not surprising because such things can happen, yet surprising because modern technology has significantly increased the chances of hitting oil.

A key question now, Piñon added, is whether Repsol, already battered by the Argentine government’s nationalization of its YPF branch earlier this month, will decide to cut its risks and leave Cuba for more productive areas.

The dry hole also will put more pressure on Castro to ensure a continuation of the ultra-close relations with Venezuela, which ships an estimated 110,000 barrels a day to Cuba, part of it for the domestic market and part for refining and export to Caribbean nations.

Chávez, a socialist who all but worships former Cuban leader Fidel Castro, has admitted that he is fighting cancer and has been unofficially reported to be terminally ill, though the details of his health remain a state secret.

With the announcement of the dry well, “the question of their reliance on Venezuelan oil has become more urgent than ever for Cuban officials,” Piñón told El Nuevo Herald in a telephone interview.

Drilling the well cost an estimated $100 million to $150 million, financed by a consortium made up of Repsol, Norway’s Statoil and ONGC, an Indian oil company, Piñón noted. Repsol owns 40 percent of the partnership, so it will be hit with that portion of the losses.

A report by the U.S. Geological Survey estimated the area northwest of Cuba may hold up to 5 billion barrels of crude, yet the Cuban government has put the estimates as high as 20 billion, and commissioned studies on how it should handle the windfall.

Cuba is not only planning how to spend its winnings in the oil lottery before a number is drawn, it hasn’t even bought a lottery ticket yet, joked one U.S. oil expert.

The Scarabeo-9 rig, owned by an Italian firm and built in China with few U.S. parts specifically to avoid U.S. embargo regulations, is now expected to drill further west off the coast of Pinar del Rio on behalf of a consortium of Malaysia’s Petronas and Russia’s Gazprom Neft companies.

Venezuela’s state-owned PDVSA oil company may get the rig afterwards for a third exploratory well, according to a dispatch from Havana by the Reuters news agency, which broke the dry-well story.

Repsol found oil in an offshore well drilled in 2004, but described the strike as “not commercial.” It began drilling the latest well in January, and the Scarabeo-9 platform was believed to have been moved away from the dry well this week.

Piñón said he had little doubt that oil exists in the areas, but that even if the Petronas-Gazprom consortium finds commercial quantities of crude, it would take at least two years and more likely five to develop full-scale production.

Repsol’s oil exploration in waters only about 70 miles from Key West had triggered concerns that a spill would send crude washing up along the ecologically fragile Florida Keys and the bays and inlets along the eastern coast of the United States. Repsol’s well was in water deeper than the Deepwater Horizon blowout in the Gulf of Mexico in 2010.

South Florida Republican Rep. Ileana Ros-Lehtinen said Friday that the dry well “is a blow to the (Castro) dictatorship’s desperate search for sources of revenues other than the billion-dollar oil subsidies it receives from fellow tyrant Hugo Chavez.

“Unfortunately, the Cuban people are not yet out of the woods as (Petronas and Gazprom-Neft) … are next in line to use the oil rig to rape and pillage Cuba’s natural resources,” she added. “These companies don’t care about the suffering of the Cuban people. Their main concern is profits and their bottom line.”