Petrobras, Cuba to Explore for Oil Close to Florida

Petrobras, Cuba to Explore for Oil Close to Florida (Update1)

By Joshua Goodman and Jeb Blount

Oct. 31 (Bloomberg) -- Brazil's Petroleo Brasileiro SA and Cuba's
state-run petroleum company have signed an agreement to explore for oil
off the communist island's coastline about 100 miles from Key West, Florida.

Brazilian President Luiz Inacio Lula da Silva signed the agreement with
his Cuban counterpart, Raul Castro, at a ceremony today in Havana.
Petrobras, as the Brazilian company is known, and Cuba Petroleo, or
Cupet, will explore Block 37, which begins three kilometers (1.9 miles)
from the Carribbean resort town of Varadero and is close to Cuban
onshore oil fields.

In September the U.S. allowed a 27-year ban on offshore drilling along
much of the U.S. coast, including waters adjacent to Cuba, to lapse. Rio
de Janeiro-based Petrobras has been one of the biggest buyers of
offshore oil leases in recent years in sections of the U.S. Gulf of
Mexico where drilling is allowed.

Petrobras is eyeing Cuba as it aims to focus non-Brazilian operations in
the Gulf, Chief Executive Officer Jose Sergio Gabrielli has said in the
company's 2008-2012 strategic plan.

Cupet is seeking technology from Petrobras, which produces more than 80
percent of Brazil's oil from offshore fields and holds many deepwater
drilling records.

The agreement allows for a seven-year exploration period. If oil is
found, production can continue for 25 more years under a shared
production arrangement. Cupet has the right to can take sole possession
of the finds after reimbursing Petrobras' exploration costs.

The accord is Petrobras' first with Cuba. The initial investment will be
$8 million.

To contact the reporter on this story: Joshua Goodman in Rio de Janeiro
at jgoodman19@bloomberg.net; Jeb Blount in Rio de Janeiro at
jblount@bloomberg.net
Last Updated: October 31, 2008 15:15 EDT

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