The main exploration and development operator in Cuba looks likely to set an oil production record for the fifth straight year.
Meanwhile, a lobby group cited a study that found that abolishing the US embargo against Cuba could provide US energy firms $2 billion-$3 billion/year in revenue.
The same report indicated that overall energy growth potential is not large in Cuba but concluded that Cuba´s location near growing markets in the US and Mexico make it an interesting crossroads for energy project development.
Production gains
Sherritt International Corp., Toronto, said its gross operated production in Cuba averaged 37,049 b/d in the quarter ended Sept. 30, up 23% from the second quarter and prior year period.
The increase was mainly from new wells in Yumuri, Canasi, and Seboruco fields.
Sherritt-operated production averaged 30,356 b/d during 2000, up 29% from 1999, and was at 30,300 b/d at the end of 2000, although fourth quarter 2000 production averaged 28,738 b/d.
Sherritt participated in four wells in Cuba in the third quarter. It drilled and placed on production two step-out wells and successfully drilled one infill well in Yumuri field. A step-out from Varadero West field failed to encounter the anticipated reservoir and was suspended awaiting tests in an upper zone.
Sherritt participated in 11 wells in Cuba in the first 9 months of 2001 compared with 7 wells in all of 2000.
Sherritt holds an indirect interest in seven exploration and production-sharing contracts totaling 3.5 million acres. An "Accelerated Block 7 Program" negotiated with the Cuban government at the end of 2000 also postponed work commitments on other concessions, said Pebercan Inc., Montreal, which participates in five concessions. Work was postponed on the Varadero Profundo block and blocks 12, 13, and 15.
Nevertheless, Pebercan said six prospects have been identified on Block 12 that represent a total of more than 200 million bbl of unrisked reserves.
Block 13, centered on Jarahueca light oil field, includes six prospects with a combined 300+ million bbl of unrisked reserves.
Block 15 contains the Mamanantuabo prospect that covers at least 45 sq km. That and two other structures have combined potential of 600+ million bbl.
US-Cuba synergies
The US embargo prohibits promising ventures that could help enhance US energy security, wrote energy economists Amy Myers Jaffe, senior energy adviser, James A. Baker III Institute for Public Policy at Rice University, and Ronald Soligo, a Rice University professor of economics.
For instance, a 270 MMcfd pipeline to ship natural gas that might be found in Cuban waters to Florida would represent a $300 million/year business opportunity, they wrote.
Jaffe and Soligo produced the study as independent consultants. Cuba Policy Foundation, founded in early 2001 in Washington, DC, commissioned the study. Leading the foundation are senior diplomats from US Republican administrations who believe that lifting the embargo would be in America´s best economic and national interests and hasten democratic reform in Cuba.
Cuba produced 46,500 b/d of oil and 57 MMcfd of gas in 2000, when its reserves were 283.5 million bbl of oil and 636 bcf of gas.
State oil firm Cubapetroleo (Cupet) recently suggested that it planned to boost output from 52,000 b/d in 2001 to 120,000 b/d in 2005, though those figures appear speculative in light of recent exploration disappointments, Jaffe and Soligo reported.
Offshore exploration
Foreign companies have shown continued interest in exploration for oil and gas in Cuba, the same study found.
Cuba awarded Spain´s Repsol-YPF SA six exploration blocks totaling 10,200 sq km that along the coast north of Havana (see map, OGJ, Dec. 11, 2000, p. 42).
"The exploration efforts in Cuba´s sector of the Gulf of Mexico are targeted on the "northern band,´ an area that extends from Guanabo in Havana province to Corralillo, 150 km to the east," said Jaffe and Soligo. "But foreign investors are also eyeing the new offshore opportunities cautiously, following the decision by Brazilian state oil firm Petrobras and its junior partner Sherritt in June 2001 to withdraw from an agreement they had signed with Cupet in 1998 to explore Block 50, a 3,000-sq km area off the north central coast, after the consortium drilled a $15 million dry well in April 2001."
That well tested a structure believed capable of holding as much as 500 million bbl of crude.
Business opportunities
Numerous other energy business opportunities exist in Cuba.
Several oil companies have looked at investing in Cuba´s four refineries, badly in need of refurbishment and modernization, but nothing has come of the talks.
Sherritt revealed that it added 8 million barrels of gross proved reserves in Cuba during 1999 at a finding and development cost of $5.03/bbl. This cost basis could be expected to decline in the future as technological gains help bring down costs, the company said.
"Sherritt´s experience implies that earnings of $8 to $19 a barrel could be considered as a realistic, high-end revenue for American firms who successfully find oil in Cuban waters," Jaffe and Soligo found. "Earnings of at least $3 a barrel would be reasonable even under low oil price scenarios. Such rates would imply that discovery and development of a 30,000 b/d oil field would represent a business opportunity valued at roughly $33 million to $208 million a year for 15 years or more."
Sherritt is also involved in a $150 million joint venture to provide gas for electricity generation on the island.
"Gas finds in Cuba might also be profitably converted to liquid fuel products such as gasoline or diesel fuel through the construction of a gas-to-liquids plant," said Jaffe and Soligo.
Repsol at yearend 2000 said it would enter joint venture activities with state Union Cuba Petroleum (Cupet) in exploration, refining, petroleum products sales and distribution, LPG and gas marketing, and power generation.
"Overall high-end growth possibilities of around 150,000 to 184,000 b/d of oil equivalent and 36,000 b/d of gasoline by 2015 still represent a solid business opportunity for regional players. Possible electricity demand growth of 48 to 107 MW by 2015 could also be of interest to foreign energy firms," said Jaffe and Soligo.
