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Page added on October 14, 2015

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Cuban Oil: Black Gold or Black Hole?

Cuban Oil: Black Gold or Black Hole? thumbnail

Cuba has oil and gas. That is certain, say geologists. The big question is just how much. Chris Schenk, Geologist at the U.S. Geological Survey, was one of the first to assess the island’s natural resources. By Schenk’s estimate Cuba has at least 4.6 billion barrels of undiscovered oil and 9.8 trillion cubic feet of undiscovered natural gas. Both are considered significant enough to pique the interest of any major energy company in the world. “People are always interested in where the oil is,” Schenk told FOXBusiness.com.  The challenge is finding and tapping those resources, which are said to be primarily in the North Cuba Basin on the northwestern part of the island.

Source: USGS

U.S. President Barack Obama and Cuban President Raul Castro sat down at the United Nations in late September as part of the ongoing efforts to thaw relations that began earlier this year. Even before the two countries started talking the Cuban government was laying the groundwork to attract partners to harness its natural resources using modern technology. Last year, Cuba’s Ministry of Foreign Trade and Investment announced it was seeking $8 billion in foreign investment as reported by the USGS. 86 of 246 planned projects are in the petroleum sector for both on and offshore blocks.

 

Source: Reuters

“It’s another Gulf of Mexico play, a possible extension of what the industry has achieved in that region,” said Richard Sawaya, Vice President of USA*Engage, during an interview with FOXBusiness.com. His organization, a broad-based coalition, is an advocate for normal commercial relations among countries and supports the lifting of sanctions against Cuba.  However the natural resources industry may not be as aggressive in Cuba as they might have been back in 2014 when oil prices were hovering around $100 a barrel. Prices have fallen 50% since.

“Given what has happened to oil prices it would be hard for me as a veteran of the industry to see exploratory work as high on the list” for major energy companies, he said.  Sawaya was a longtime executive at Atlantic Richfield Company (ARCO) which was acquired by BP (BP) in 2000.

Still, Sawaya notes there will be conversations. Drilling giant Halliburton (HAL) is just one of the major U.S. energy companies eyeing Cuba. A spokesperson tells FOXBusiness.com that they are closely monitoring the discussions between the U.S. and Cuba.

Canadian oil company Sherritt International, which has been operating in the region for 20 years, tells FOXBusiness.com executives are watching the developments with great interest.  Sherritt currently produces 34,000 tons of nickel annually and 18,000 barrels of oil a day. “We have found Cuba to be a good stable environment for our business,” said Scott Tabachnick, Senior Manager, Investor Relations and Communications, at Sherritt, adding, “What’s good for Cuba tends to be good for Sherritt.”

FOXBusiness



15 Comments on "Cuban Oil: Black Gold or Black Hole?"

  1. Plantagenet on Wed, 14th Oct 2015 2:07 pm 

    How perfect….HALLIBURTON wants Obama to open up Cuba’s oil sector to US companies so they can explore for oil there.

    Hahahahahahahahahahaahah! How wonderfully ironic.

    Cheers!

  2. ghung on Wed, 14th Oct 2015 3:57 pm 

    Didn’t Repsol or somebody spend a couple of billion looking for oil there a few years ago? Said there was no joy there?

  3. Plantagenet on Wed, 14th Oct 2015 4:02 pm 

    The Italians drilled a prospect in offshore Cuba and didn’t hit oil. The Canadians hit oil elsewhere in Cuba and currently produce 18,000 bbls/day as discussed in the article above.

    The oil biz is like that—you don’t hit oil with every well.

    Cheers!

  4. penury on Wed, 14th Oct 2015 4:10 pm 

    I estimate that there is at least a billion barrels of BS which will be spilled about Cub. Oil and whomever will benefit. Remember the Chinese?

  5. ghung on Wed, 14th Oct 2015 4:22 pm 

    Sure, Plant. Repsol is Spanish: used a Chinese-built Italian-owned rig to avoid US trade embargos against Cuba. (and it was only about $150 million)

    “By Jeff Franks

    HAVANA, March 30 (Reuters) – Spanish oil firm Repsol’s likely decision to leave Cuba after its 12-year-long quest for offshore oil produced just two dry holes is a devastating and perhaps irrecoverable blow to the communist island’s oil hopes, experts said on Wednesday.

    Its legacy of failure sends a discouraging signal about Cuba to the oil industry and its departure, which is not yet official but looks almost certain, will leave the Caribbean country without the company that has led efforts to explore its waters.

    “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,” said Cuba oil expert Jorge Pinon at the University of Texas in Austin.

    Cuba says it may have 20 billion barrels of oil in its offshore fields, which offers the promise of ending its chronic economic woes and its dependence on Venezuelan oil.

    Under President Hugo Chavez, Cuba’s closest ally, Venezuela ships the island 115,000 barrels a day in an oil-for-services deal, but his battle with cancer and fight for re-election in October have underscored the tenuous nature of the arrangement.

    Repsol announced on May 18 that its long-anticipated well in the Florida Straits near Havana had come up dry, which followed its first unsuccessful well in the same general area in 2004. They are only offshore wells drilled in Cuba.

    On Tuesday, Repsol chairman Antonio Brufau said at a Madrid news conference it was “almost certain” the company would not drill again in Cuba, where it has spent an estimated $150 million during its 12 years of work….

    ….It is unlikely that another company would go to such lengths to drill in Cuba, chiefly for economic reasons, Pinon said.

    With the high cost of exploration, oil companies prefer to spend their money in places with the known potential for very big oil fields instead of frontier areas like Cuba with unknown prospects, he said.

    “Companies leave or stay away from Cuba not because there’s not oil, but because it’s just not big enough (in terms of oil potential),” he said.

    While Cuba says it has 20 billion barrels of oil offshore, the U.S. Geological Survey estimates just 5 billion barrels.”

    http://www.reuters.com/article/2012/05/31/cuba-oil-repsol-idUSS1E84R01520120531

  6. rockman on Wed, 14th Oct 2015 6:20 pm 

    And just a reminder: many dozens of wells were drilled in the N Sea before the first major oil field was discovered. A dry hole only means there’s no oil where they poked that hole. Soong ago I forget thd number but a number of dry holes were drilled before they discovered Ghawar.

  7. makati1 on Wed, 14th Oct 2015 8:26 pm 

    I doubt any new Cuban oil fields will be developed at the current value of oil. And it would be years before the first profits would start to roll in. A big gamble in today’s world. Yes? No?

  8. Boat on Wed, 14th Oct 2015 9:08 pm 

    mak,
    Sure would be a big gamble. Just like spending money in Iran would be a big gamble. Lots of money out there though.

  9. makati1 on Thu, 15th Oct 2015 2:16 am 

    Boat, no, there is not a lot of money out there. The big oil companies are up to their ears in debt as are most countries. They are scrambling to stay in business for the most part and countries are printing their way to hell. The race is on to the bottom and you are chained to the race cars if you have any debt or rely on the system in any way. Maybe China still has money to invest in resources, but no Western country does.

  10. Westexasfanclub on Thu, 15th Oct 2015 4:05 am 

    My best wishes to the cuban people.

    May they become free and prosper. May the end of the US-embargo and their own oil help them in this quest.

    May they avoid all political extremes.

    May they be happy.

  11. Davy on Thu, 15th Oct 2015 6:01 am 

    Folks this is what dog paw is talking about. You know China is the only on left with money.

    CLSA Just Stumbled On The Neutron Bomb In China’s Banking System
    Hong-Kong based CLSA

    http://www.zerohedge.com/news/2015-10-13/clsa-just-stumbled-neutron-bomb-chinas-banking-system

    Two weeks ago, using Macquarie data, we found something disturbing at China’s micro level: not only are a quarter of Chinese firms with debt unable to cover their annual interest expense currently but when just looking at the commodity sector, roughly half of all companies are in the same dire straits, as a result of the collapse in commodity prices which translates into a drop off in cash flow which makes just the annual all-in cash interest payment impossible.

    According to CLSA estimates, Chinese banks’ bad debts ratio could be as high 8.1% a whopping 6 times higher than the official 1.5% NPL level reported by China’s banking regulator!

    If one very conservatively assumes that loans are about half of the total asset base (realistically 60-70%), and applies an 8% NPL to this number instead of the official 1.5% NPL estimate, the capital shortfall is a staggering $1 trillion.

    the real reason for the lack of a credit impulse is that banks have been quietly soaking up the funds not to lend them out, but to plug a gargantuan, $1 trillion, solvency shortfall which amounts to 10% of China’s GDP!

  12. rockman on Thu, 15th Oct 2015 6:01 am 

    Mak- “I doubt any new Cuban oil fields will be developed at the current value of oil. True but OTOH if a big Deep Water oil field were discovered next year they likely wouldn’t begin first oil sales until 2022…or later. What would oil prices be then? The difficulties of predicting long term oil prices cuts both ways: think about the company that spent $1+ BILLION over the last 4 or 5 years in the DW GOM and begins their first oil sales next month.

  13. Boat on Thu, 15th Oct 2015 6:46 am 

    Mak,

    Those investors that up to a few months ago held 17% of the junk bond market bond markets made around 6% for years. That’s what the .O1%ers do.

  14. makati1 on Thu, 15th Oct 2015 7:08 am 

    rockman and Boat, past history is no guarantee of future gains. In fact, has there been ANY gains in the last 15 years if real numbers were used to make the charts? I doubt it. Too many lies and manipulations to give anywhere near true figures. But look around you and see the actual results of those years.

    In the Us alone ~47,000,000 Americans stand in soup lines everyday. Infrastructure is not being repaired or upgraded. Real incomes are going down for the bottom 90+%. Real unemployment is north of 20%. Debts of all kinds now exceed the ability to ever repay them. And on and on…

    Only a fool would part with his money in any energy investment today. Or any investment that is not a necessity. But, there are always fools who believe they can beat the odds. I’m not one of them. LOL

  15. BobInget on Thu, 15th Oct 2015 10:15 am 

    IF the embargo is lifted it will be because a US major feels the overwhelming need to spend shareholder money (OPM) looking for a sweet spot in the Florida straights.

    Rockman’s statement the other day concerning ‘dry holes’ being a thing of the past must refer to
    oil sands or certain shale deposits. All shales were not created equal.

    When a productive ultra deep water set up costs
    close to a billion to develop, comparisons must be made to Alberta’s or Orinoco’s oil sands.
    Comparing ‘tar’ sands possible environmental damage need to be compared to BP’s Macondo’s 60 billion dollar GOM ‘spill’.

    If a Cuban well goes bad, hotel owners from Key Biscayne to Veradaro Beach to Torquey are going to do lousy Faulty Towers imitations.

    Here’s the skinny.
    The US blew off Canadian oil sands.
    The US seeded Venezuelan exports to China and Russia.

    While I’ve been warning this would happen, it is quickly becoming apparent reality.

    The probable next President H. Clinton nixed Key
    XL the other day guaranteeing Canada oil independence. Redundant gas pipelines, “Energy East’ will supply Eastern Provinces with mixtures of NGL’s and heavy oil.

    Bottom line;
    Without the volumes of Venezuelan or Canadian
    oil to which we have grown accustomed, Cuba looks better every day.

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