Repsol: Exploratory oil well off Cuba comes up dry

An exploratory oil well off the northern coast of Cuba has proved a failure and will be capped and abandoned, Spanish company Repsol said Friday, a disappointment for a cash-strapped nation hoping for an economic lifeline.

Trial and error is par for the course in oil exploration, however, and analysts said the news is far from a death blow to Cuba's petroleum dreams.

Repsol SA is evaluating the data it collected since the Scarabeo-9 rig arrived off the coast of Havana in January after a months-long, round-the-world trek from construction sites in China and Singapore. The company has not yet decided whether to sink further wells in the area, spokesman Kristian Rix said.

Rix said four of every five offshore wells come up dry, and it's too soon to determine whether other parts of Repsol's exploration block are commercially viable.

"Mapping an (offshore) oil field is like trying to draw a map of a city when all you have is one in 10 lampposts working and a bit of a fog," Rix said by phone from Madrid. "It's very hard to do, so I can't draw any conclusions from one well about the whole rest of it. These are questions that geologists will have to answer."

Nor does the failed well mean that the rest of Cuba's offshore exploratory area, which has been estimated to hold 5 billion to 9 billion barrels, is barren.

"I think it's disappointing news, but in my opinion it doesn't mean that the whole of the Cuban north belt is not a geological zone that in the future could produce a substantial amount of hydrocarbons," said Jorge Pinon, former president of Amoco Oil Latin America and now an energy expert at the University of Texas.

"It's disappointing, but it's not surprising," he added.

The Cuban government did not immediately respond to a request for comment.

The project has generated controversy in the United States, with concerns of a possible environmental disaster like the 2010 Macondo-Deepwater Horizon blowout and spill on the other side of the Gulf.

Many feared it would be impossible for longtime foes in Washington and Havana to coordinate response and containment, threatening large stretches of coastline in Cuba, Florida and beyond. Repsol has sought to allay those fears by opening up the drill rig to U.S. inspectors, and by openly sharing data with both governments.

Meanwhile Cuban-American politicians have criticized the Obama administration for not stopping the drilling altogether. The 50-year-old U.S. economic embargo already essentially bars American companies from doing oil business with Cuba and threatens sanctions against foreign companies if they don't follow its restrictions, but hard-liners say even tougher measures are needed to discourage firms like Repsol from teaming up with the Cubans.

"The Obama Administration looked the other way as Repsol aided the Cuban tyranny's dangerous scheme to become the oil barons of the Caribbean," Congresswoman Ileana Ros-Lehtinen said in a statement Friday.

The sanctions have greatly complicated the drilling project, making it far more difficult to line up equipment and resources. The massive Scarabeo-9 platform had to be constructed in Asia with less than 10 percent U.S.-made parts to avoid violating the embargo.

Cuba has been struggling to lift its weak economy out of the doldrums for years, and the prospect of oil riches is a major part of the country's master plan. A big find would also lessen Cuba's reliance on Venezuela, which gives Cuba $3 billion a year in oil subsidies, but whose leader is ailing with cancer.

The failure of the well is also surely a letdown for Repsol, which has now come up empty in two Cuban wells drilled over the last decade. Repsol and its partners were leasing the rig for about a half-million dollars a day.

Rix declined to say how much has been spent to carry out the exploration.

Pinon said the typical cost of sinking a deep-water well in the Gulf of Mexico runs around $100 million to $150 million.

Also weighing on the company's Cuba plans is its dispute with Argentina over that nation's takeover of Repsol's majority stake in oil and gas producer YPF, Pinon said.

"You have to add the challenges that Repsol is having vis-a-vis YPF Argentina," he said. "Will the challenges that Repsol is going to have force them to focus more of their worldwide exploration into areas in which they know that there is a lower risk, for example the U.S. Gulf of Mexico?"

Diplomats and industry sources say the Scarabeo-9 rig will be rented out next by Malaysian oil company Petronas for exploration north of Cuba's Pinar del Rio province, to the west of Havana.


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