Weekly Offshore Rig Review: Caribbean Dreams

When one thinks of the Caribbean, visions of white sandy beaches and fruity cocktails with little pink umbrellas are not far behind. Perhaps furthest from that mental vacation is the large oil and gas deposits found offshore.

Did you know that just one of Trinidad and Tobago's offshore fields is believed to contain 10 tcf of gas? The potential for comparable gas deposits in neighboring fields is likely, experts believe.

Trinidad and Tobago hold one of the most coveted oil and gas basins in the world today. BP alone has 18 of its top 25 wells off Trinidad. Its three Cannonball development wells are producing about 600 MMcf/d. British Gas (BG) is also profiting from the region. Two wells in its Dolphin Deep development are producing about 300 MMcf/d.

Canadian Superior is also taking advantage of the gas opportunities in the region. The company is preparing to drill three back-to-back wells on its Intrepid Block 5(c), 90 mi off the east coast of Trinidad. Canadian Superior is waiting for the Kan Tan IV semisubmersible drilling rig, operated by Maersk Contractors, which is currently undergoing a major refurbishment in Brownsville, Texas. Drilling will start in May.

Canadian Superior says it is looking to expand its land holding offshore Trinidad and Tobago. The company participated in the most recent Trinidad and Tobago offshore bid round held in November 2006. The results of the bidding are expected later this month.

Trinidad and Tobago are not the only Caribbean Islands cashing in on the oil and gas resources off their coasts. The Ministry of Energy and Environment of Barbados recently finished a Multi Client Seismic Survey Campaign in preparation for its first offshore licensing round, which is expected to be announced in June. The fist phase of the 2D Survey Campaign consists of 6,000 km of long offset Multi Client 2D data.

The Wavefield Inseis survey set out to establish major hydrocarbon trends offshore Barbados, particularly between the Tobago Basin, the Barbados Ridge, and Barbados Trough.

In a statement from Wavefield Inseis, Jan B. Gateman, senior VP G&G said, "taking into account the hydrocarbon discoveries in the northern parts of the offshore sector of Trinidad and Tobago, it is very likely that an active petroleum system is present on the Barbados continental shelf."

Andre Brathwaite, Chief Geologist, Ministry of Energy and the Environment of Barbados, supported Gateman's statement: "The data produced from this survey has so far proven to be encouraging and I believe that this will generate increased interest in the Barbados offshore potential."

Recently, sizable discoveries in the North Cuba Basin have the US and the international oil and gas industry's attention. Less than 70 mi from Florida 4.6-9.3 Bbbl of crude and 9.8 –21.8 tcf of natural gas rests under the seafloor, according to a report by the US Geological Survey.

While companies from Brazil, Canada, China, India, Norway, Spain, and Venezuela have expressed interest in drilling in the North Cuba Basin, the US remains on the sidelines, hindered by a trade embargo set in 1961

The US Congress is looking into an exception to the embargo for the US majors. However, the Bush administration opposes any immunity.

Until recently, Cuba's oil production has been just 68,000 b/d. Oil was first discovered in Varadero in 1971 with help from the Soviet Union. In 1992, Canada's Sherritt International started joint production with Cuba Petróleo, which currently produces about half of the nation's oil from onshore fields.

When Repsol YPF discovered oil offshore in 2004, the country was hopeful. With help from ONGC and Norsk Hydro, Repsol explored six of the 59 deepwater blocks off Cuba in 2006. Petronas, in its own deal, secured four blocks, ONGC picked up two, and PDVSA won four.

According to a Fortune magazine report, the companies are currently studying the seismic data, but Repsol hopes to start exploration and drilling later this year.

While most of the drilling in the Caribbean has taken place off Trinidad and Tobago, four other countries have held enough interest to attract drilling. As far back as 2001, Conoco drilled off Barbados using Transocean's Deepwater Pathfinder. Costa Rica attracted IODP from May 2004 through May 2005, and Chevron drilled off of Columbia from October 2005 through June 2006. As discussed above, Repsol performed exploratory drilling off the coast of Cuba from May 2004 through July 2004.

Since 2001, only 30 rigs managed by 14 companies and employed by 14 operators have drilled in the Caribbean. Rig rates held fairly steady from 2001 though 2005, but an increase in day rates occurred in 2006 as they climbed from an average of $59,000 in 2005 to as much as $120,000 in October 2006. Rates have fallen slightly since then and are currently averaging $116,250. That average is expected to climb to as much as $225,750 in Q1 2008 when the semisubmersibles Ocean Worker and Kan Tan IV will be at work in the region and earning higher-than-average day rates. This won't last long, as the average day rate will drop significantly when those higher-specification semisubs leave the region with a handful of jackups working for rates in the low to mid $100s.

Currently there are six jackups working off Trinidad and Tobago. GlobalSantaFe leads the way with two rigs working for BP.

Later this year, as mentioned above, Canadian Superior is expected to start drilling off Trinidad and Tobago. Anadarko will spend about a month drilling with the Rowan Gorilla III jackup starting in August and PetroCanada will pick up the Rowan Gorilla II in October and use it through July 2008. BG will bring in Transocean's Sovereign Explorer semisubmersible in September and drill through December. Also in September we expect Diamond Offshore's Ocean Worker semisubmersible to start drilling for PetroCanada through March 2008.

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