Wednesday, May 30, 2012

Blow to Cuban hopes for oil as well proves dry

Posted on Tuesday, 05.29.12

Blow to Cuban hopes for oil as well proves dry
Associated Press

MADRID -- Spanish oil firm Repsol said Tuesday it will stop looking for
oil in Cuba after hitting a dry well drilled at a cost of more than $100
million, a blow to the island nation desperate to find its own energy
sources amid deep economic hardship.

Speaking to investors and reporters about the firm's plans over the next
four years, Repsol Chairman Antonio Brufau said the company "won't do
another" well in Cuba. "The well we drilled turned out dry and it's
almost certain that we won't do any more activity there," Brufau added.

Cuba's last chance for hitting oil in the near future could come from
Malaysian state oil company Petroliam Nasional Berhad (Petronas), which
started drilling last week in an area of the Florida Straits known as
the Northbelt Trust, about 110 miles southwest of Repsol's drill site.
Results are expected in July.

Experts say it is not surprising that Repsol's 3-mile deep exploratory
well was a bust. Four out of five such wells find nothing in the
high-stakes oil game, and petroleum companies are built to handle the

The Scarabeo-9 platform that Repsol used is the only one in the world
that can drill in Cuban waters without incurring sanctions under the
U.S. economic embargo, but it is scheduled to head to Brazil after being
used for one to four more exploratory Cuban wells.

A delay in finding oil would hurt Cuba because 80-year-old President
Raul Castro is trying to lift the country's economy through limited
free-market reforms, and has been forced to cut many of the subsidies
islanders got in return for salaries of just $20 a month.

It could also make Cuba more dependent on Venezuela, which provides $3
billion of subsidized oil each year. Venezuelan leader Hugo Chavez is
suffering from cancer, and the deal might disappear if he dies or
doesn't win re-election in October.

Industry experts have said Repsol YPF SA was under contract to drill a
second Cuban well but could get out of the deal by paying a penalty to
an Italian company that owns the drilling platform used for Repsol's well.

Brufau didn't mention the penalty, and Repsol spokesman Kristian Rix
said he could not immediately provide details on how the arrangement
would work.

The Scarabeo-9 was built in Asia with less than 10 percent U.S.-made
parts to avoid violating Washington's embargo.

Because of the embargo, Cuba is shut off from borrowing from
international lending institutions. An oil find could change the
situation, with Cuba using future oil riches as collateral to secure new
financing, economists say.

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