Thursday, December 27, 2007

Cuba oil and gas stagnates despite investments

Cuba oil and gas stagnates despite investments
Wed Dec 26, 2007 5:29pm GMT

HAVANA, Dec 26 (Reuters) - Cuban oil and gas output rose only slightly
to the equivalent of 4 million tonnes this year despite a significant
increase in investment, state-run media reported on Wednesday.

Oil output was 2.9 million tonnes, or around 57,000 bpd, assuming 7
barrels per tonne, down slightly from the 2.98 million tonnes reported
in 2006.

Natural gas production was reported at 1.215 billion cubic meters, up
from the 920 million cubic meters reported in 2006.

Vice President Carlos Lage, during a Christmas Day tour of oil
facilities, praised efforts to maintain output despite the natural
depletion of existing wells, and in particular the use of natural gas to
generate 15 percent of the country's electricity.

Cuba has prioritized energy production and savings in the face of
skyrocketing prices and despite its alliance with oil-rich Venezuela.

Lage said Cuba produced 47 percent of its fuel needs.

Cuba imports the rest of its fuel from Venezuela in exchange for the
services of 31,000 medical personnel and 8,000 other Cubans working in
the South American country.

Cuba bought and rented 10 Chinese drilling rigs in recent years, Lage
said, and drilled 32 wells in 2007 -- mostly in partnership with
Canadian company Sherritt International (S.TO: Quote, Profile, Research)
-- compared with 23 wells in 2006.

Lage said a record number of seismic studies were carried out on land,
just off the coast, and in Cuba's Gulf of Mexico waters where various
foreign companies have taken out blocks.

Cuban production is concentrated along the northwest heavy oil belt, an
80-mile (128-km) stretch of coast in Havana and Matanzas provinces which
produces all of Cuba's heavy crude with a density rating of 8 API to 18
API and with a high sulfur content.

Most new wells are drilled vertically to the shore from two to seven
kilometers out to sea.

The poor-quality oil is burned in modified power plants and factories.

In 2006 Cuba began shipping small amounts of the crude to Malaysia.

Canadian companies Sherritt International and Pebercan Inc. (PBC.TO:
Quote, Profile, Research), in conjunction with state-run Cubapetroleo
(Cupet), account for 60 percent of the output.

Cupet has signed agreements with various companies, including
Venezuela's PDVSA, Spanish major Repsol YPF (REP.MC: Quote, Profile,
Research), Norway's Norsk Hydro, ONGC Videsh Ltd (the overseas arm of
India's state-owned Oil and Natural Gas Corp) and other state firms from
Vietnam and Malaysia to drill in the mile-deep (1.6-km) waters of the
Gulf of Mexico.

A consortium made up of Repsol-YPF, ONGC Videsh and Norsk is expected to
begin drilling late next year.

Cuba's 43,250-square-mile (112,000 sq km) exclusive economic zone in the
Gulf of Mexico was parceled into 59 blocks for foreign exploration in 1999.

The U.S. Geological Survey has estimated the North Cuba basin could
contain some 4.6 billion barrels of oil, with a high-end potential of
9.3 billion barrels, and close to 1 trillion cubic feet of natural gas.

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