Sunday, June 10, 2012

Cuba's Oil Hopes Coming Up Dry

The announcement last year of a potentially vast oil reserve off the coast of Cuba looked like a game-changer for the impoverished island nation, but Cuba's hopes suffered another blow last week as a test well came up dry.  Now Spanish oil firm Repsol said it is likely that they will withdraw from the hunt for Cuban oil, potentially giving up their stake in an reserve that could contain 20 billion barrels of oil.

But finding such a reserve in deep ocean waters can be a formidable challenge.  Repsol spent an estimated $100 million drilling their test well.  While dry wells are a common occurrence in oil prospecting, Repsol has apparently decided the likelihood of hitting oil with a future well did not justify a further expense.  This leaves Indonesia's Petronas as the only company actively prospecting for oil off the coast of Cuba; the results from their test well are expected in July.

Cuba had high hopes for the oil deposits identified in their coastal waters.  Oil taken from the offshore deposits could make Cuba energy independent, with enough then left over to transform Cuba into an oil exporting nation.  Oil exports would give the Cuban government of Raul Castro an effective tool in fighting the embargo levied against Cuba for the past half-century by the United States, as well as providing a large source of revenue for Cuba's state-run economy.  But with the global hunt for oil having success in locations around the world (with many of those places being in Africa) and techniques like hydrofracking making known, but previously not exploited, reserves profitable, there seems to be less incentive for international oil companies to hunt of elusive deposits of crude off the coast of Cuba.  At the same time, Cuba's domestic petroleum industry does not have the resources or expertise to drill in the deepwater themselves, leaving the Cuban government's oil plans on the edge of failure.
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