Repsol to Begin Offshore Cuba Drilling Later This Year

Saipem-owned semisubmersible Scarabeo 9 is set to leave Keppel Shipyard in Singapore next month or July and arrive offshore Cuba sometime in September to drill the Jaguey prospect for Repsol in 5,300 feet of water, a little bit deeper than the Macondo well, said Jorge Pinon, a visiting fellow with the Florida International University Latin America and Caribbean Center's Cuban Research Institute.

The Jaguey well will be drilled to more than 20,000 feet approximately 55 to 60 miles south of Key West, Florida and 22 miles north of Havana, said Pinon, who is a former president of Amoco Oil Latin America; he retired in 2005 from BP, which acquired Amoco. According to RigLogix, Scarabeo 9 will earn a day rate in the low-$470,000s.

While Cuba opened its offshore Gulf of Mexico zone for drilling five years ago, Repsol and other operators who hold interests in Cuban blocks, including Malaysia's Petronas and Russia's Gazprom, encountered difficulty starting their drilling programs as the U.S. embargo on Cuba meant that rigs used to drill in Cuban waters must be outfitted with no more than 10 percent of U.S components.

Operators then ordered the Scarabeo 9, which has been outfitted to meet U.S. embargo requirements. The rig is expected to be used for drilling five to seven exploratory wells. Repsol will use the Scarabeo 9 to drill two exploratory wells for Repsol, Petronas is expected to use the rig to drill two wells. Venezuelan state energy company PDVSA and Angola state energy company Sonangol might pick up the rig for drilling offshore Cuba as well.

Last year's Macondo oil spill has raised concerns about what would happen if an oil spill occurred offshore Cuba. A spill here would threaten Key West and the U.S. East Coast; The embargo means that, if an emergency arises or if a piece of equipment is needed, international oil companies operating offshore Cuba could not turn to U.S. based companies in these situations. The U.S. also does not have a spill agreement with Cuba as it does with Mexico, with drill exercises conducted twice a year. Pinon noted that companies with interests offshore Cuba would ask for a general license to allow them access to U.S. Gulf Coast companies and assets in both situations.

The embargo means that Repsol and other companies have to bring in workers for planned exploratory programs offshore Cuba are being brought in from Norway, the UK and Canada. "Utilizing workers from the U.S Gulf Coast would be the most economic and closest, but the embargo doesn't allow that," Pinon said.

Pinon said that the Cuban government has adapted into their regulations many of the regulations that came out of Bureau of Ocean Energy Management, Regulation and Enforcement since the Macondo oil spill and will use many of the lessons BP learned from Macondo for exploratory drilling offshore Cuba. Cuban officials discussed drilling and safety plans at a conference in Trinidad and Tobago two weeks ago.

Cuba is seeking to explore for and develop its oil resources in order to reduce its dependency on oil imports from Venezuela, Pinon said. According to a U.S. Geological Survey in 2004, a mean of 4.6 billion barrels of undiscovered oil and a mean of 9.8 Tcf of undiscovered gas lie in the North Cuba Basin of northwestern Cuba.


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