Repsol’s Cuban exit is probable death knell for the island’s oil hopes

Antonio Brufau, CEO of Repsol has essentially confirmed that the Spanish company will be cancelling its exploration operations in the waters offshore Cuba, shattering the island’s dreams of oil wealth and energy self-sufficiency.

Repsol had originally been due to drill three wells, but disappointing results have led the company to abandon the project. 12 years of operations offshore Cuba resulted in the company drilling just 2 wells, both of which came up dry. With this in mind, it is perhaps hardly surprising that the company has decided to move on: Jorge Pinon, a Cuba oil expert from the University of Texas was quoted by Reuters as saying, “They’ve been there since 2000, so I believe Repsol has performed over and above the call of duty. No other company I’ve known would have had the staying power Repsol has had.”

Cuba estimates that it has somewhere in the region of 20 billion bbls of recoverable oil reserves in its offshore exclusive economic zone (EEZ). However, according to the US geological survey, the Cuban figure is wildly optimistic and 5 billion bbls is considerably more likely. At present, the ailing Cuban economy relies heavily upon oil imports from Venezuela.

With Repsol’s departure, the likelihood of another company taking its place is unlikely. Not only will the disappointing results of earlier exploration activities put a dampener on any enthusiasm for the region, but the US trade embargo means that everything from the contracts, to the equipment used has to be specially procured and shipped from much further afield. According to Pinon, the embargo increases the costs of operating in the region by 18 – 22%. With exploration costs already high across the globe, companies are much more likely to head to regions where there are large, proven reserves.

Whilst Repsol might be disappointed about its most recent well coming up dry, the feeling is likely to be even stronger in Cuba, where pressure for economic reforms grows daily.

A glimmer of hope

Despite the gloomy news, some hope still remains in the guise of another well, run by Petronas and Gazprom, situated 100 miles to the west of Havana. Although, many predict that if this well was also to turn up dry, the future for oil exploration offshore Cuba would enter into very uncertain times. One analyst referred to that scenario as “game over.”

Edited from various sources by David Bizley

Read the article online at: https://www.oilfieldtechnology.com/exploration/31052012/repsol%E2%80%99s_cuban_exit_is_probable_death_knell_for_regional_oil_hopes/