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Repsol Drills Duster Offshore Cuba

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Spanish oil titan Repsol on Friday announced it would plug and abandon an exploration well offshore Cuba.

Repsol’s well in Cuba’s exclusive economic zone (EEZ) was drilled by the Scarabeo 9, a 6th generation semi submersible drilling rig.

The Saipem-owned rig failed to find hydrocarbons, and Repsol’s spokesman told BusinesWeek that the result is disappointing but not unusual saying that every four of five offshore wells turn out to be a dry hole.

He said that the Spanish company was analyzing the data collected before making any further decisions.

Scarabeo 9, capable of operating in water depths of up to 3,600 meters, was built by Singapore’s Keppel specifically for this campaign.

Due to the United States trading embargo against Cuba, Repsol had to come up with a rig with almost no U.S. made parts in it, and according to Reuters, the only U.S. manufactured part on the Scarabeo 9 rig is a blowout preventer, a part that malfunctioned and caused the Deepwater Horizon disaster in the U.S. Gulf of Mexico in 2010.

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Cuban well progressing slowly

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News Wires ,
16 April 2012 01:36 GMT

Drilling of the first well in the long-awaited exploration of Cuba‘s offshore oilfields has gone slower than expected, but should be completed by mid-May, according to reports.

Reuters quoted sources close to the project as saying drillers had encountered harder rock beneath the sea bed than expected, which combined with other minor problems, had slowed progress.

When drilling began on 1 February Spanish oil giant Repsol YPF said drilling of the deep-water well was anticipated to take about 60 days to complete.

A Repsol spokesman could not confirm on Friday the projected mid-May completion date, when contacted by Reuters.

This well, which is in 1706 metres of water off the communist-run island’s north-west coast, is the first of five currently planned, Cuban officials say.

Cuba has said it could have 20 billion barrels in its offshore fields. It needs the oil to end its dependence on Venezuela, which ships it 114,000 barrels a day.

Cancer-stricken Venezuelan President Hugo Chavez is Cuba’s top ally, but island leaders worry that the oil flow could stop if he dies or loses his bid for re-election later this year, Reuters reported.

The US Geological Survey estimated Cuba may have 5 billion barrels of oil and 10 trillion cubic feet of natural gas offshore, but its study covered only part of the Cuban zone.

Reuters cited various unnamed sources as saying Repsol had been encouraged by its findings thus far, but the company has said results will not be known until the well is finished and studies are conducted.

Oil experts say it will take three years or more to bring the Cuban oil on line, if enough is found to justify production, according to Reuters.

After Repsol completes its well, it will hand the Scarabeo 9 drilling rig over to Malaysia’s state-owned Petronas and its Russian partner Gazprom Neft for a second well.

Then it will go back to Repsol, which has a consortium with Norway’s Statoil and ONGC Videsh, a unit of India’s ONGC, for another well, Reuters reported.

The massive Chinese-built rig, which is more than 32 kilometres offshore but visible from Havana, is being leased from owner Saipem, a unit of Italian oil company Eni.

Due to the longstanding US trade embargo against Cuba, no American oil companies are involved in the project.

Repsol drilled a well in Cuban waters in 2004 and found oil, but said it was not commercially viable. Technological limitations imposed by the embargo made it difficult to find another rig for work in Cuba, industry sources have said.

The project has raised environmental concerns in the US, particularly in Florida, which is 145 kilometres north of Cuba and fears its shores could be damaged if there is an accident similar to the BP oil spill in the Gulf of Mexico in 2010.

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Rig Hired by Spain’s Repsol Arrives off Cuba

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HAVANA – A deepwater oil rig hired by Spain’s Repsol-YPF for use in Cuba’s Gulf waters has arrived off the island’s coast and will be put into operation shortly.

The Scarabeo-9 platform was about 10 miles off northern Cuba Thursday and could already be seen from the coast.

The rig, built in China and Singapore and initially due to arrive in the summer of 2011, is heading west to an area off the coast of the city of Mariel, an industry official told Efe, adding that exploratory drilling is expected to begin soon.

The platform will be used to determine the crude potential of Cuba’s Exclusive Economic Zone, which is located in the southeastern Gulf of Mexico and estimated to hold up to 9 billion barrels of petroleum in more than a score of commercially significant prospects.

The EEZ covers some 112,000 sq. kilometers (43,240 sq. miles) and is divided into 59 blocks of 2,000 sq. kilometers (772 sq. miles) each, 22 of which have been awarded to foreign companies such as Spain’s Repsol, Venezuela’s PDVSA and PetroVietnam.

Eight onshore blocks also have been awarded to Cuban state oil firm Cupet and five others to foreign companies, according to official figures.

Cuba’s oil and gas output has stabilized over the past five years at a level of 4 million tons of oil equivalent, according to the Basic Industry Ministry.

Last year, several U.S. House Democratic and Republican leaders urged Repsol, which also has leases to drill in U.S. waters of the Gulf of Mexico, to drop plans to explore for oil in Cuban waters and warned the company of possible legal action in the United States.

In a letter sent to Repsol Chairman and CEO Antonio Brufau, 34 House lawmakers said any exploratory drilling the oil company conducts in Cuban waters “will provide direct financial benefit to the Castro dictatorship.”

U.S. officials also have expressed concerns about environmental risks considering the drilling site’s proximity to U.S. soil, just 95 miles from the Florida Keys, although Repsol has pledged to adhere to U.S. regulations and the highest industry standards in its drilling in Cuban territorial waters.

The U.S. Bureau of Safety and Environmental Enforcement and the U.S. Coast Guard inspected the Scarabeo-9 last week and found it to be in compliance with U.S. and international standards governing deepwater drilling.

BSEE director Michael Bromwich told the House and Senate last year that U.S. authorities had witnessed a spill response exercise carried out at Repsol’s office in Trinidad and that during that simulation Repsol technicians demonstrated their ability to respond successfully to a hypothetical spill.

Concerns about Cuba’s plans to tap its offshore oil reserves have grown in the wake of the devastating 2010 BP oil spill in the Gulf of Mexico.

Cuba is hoping crude discoveries will provide a boost to the communist-ruled island’s ailing economy and make it less dependent on imported oil from close ally Venezuela. EFE

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What if… Is The US Prepared For Cuban Oil Rigs?

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By John Konrad On January 10, 2012

Will the United States be prepared if Cuba’s new offshore rigs spill oil into US waters?

To address this question, personnel from the U.S. Coast Guard and the Bureau of Safety and Environmental Enforcement (BSEE) completed a review today of the offshore oil rig Scarabeo 9 following an invitation from the vessel’s operator, Repsol. While aboard the Scarabeo 9, personnel reviewed vessel construction, drilling equipment, and safety systems  in anticipation of the rig’s upcoming drilling operations in Cuba’s exclusive economic zone in the coming months.

According to the Coast Guard, the  review is “consistent with U.S. efforts to minimize the possibility of a major oil spill, which would hurt U.S. economic and environmental interests”. While US regulators exercise no legal or regulatory authority over the rig, the review compared the vessel with applicable international safety and security standards as well as U.S. standards for drilling units operating in the U.S. Outer Continental Shelf. U.S. personnel found the vessel to generally comply with existing international and U.S. standards by which Repsol has pledged to abide.

In anticipation of an increase in drilling activities in the Caribbean Basin and Gulf of Mexico, the United States is participating in multilateral discussions with the Cuba as well as other countries nearby including Bahamas, Jamaica and Mexico on issues including, drilling safety and oil spill preparedness. The Coast Guard views the cooperation as providing valuable information on each country’s spill response plans and capabilities. The Coast Guard is also working to update contingency plans for spills on international waters that could potentially affect U.S. waters and coastline.

In addition to international cooperation, the USCG and BSEE have involved more than 80 federal, state, local, and maritime industry representatives in spill response plans. The group held a table top exercise on Nov. 18, 2011 to address a hypothetical international spill off the coast of Florida. The exercise allowed participants to discuss sensitive environmental areas, planning strategies, likely issues and response coordination principles that responders would face, as well as gather additional information to use in future planning.

The USCG notes the review conducted today does not confer any form of certification or endorsement under U.S. or international law.

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Cuba Oil Drilling Tests U.S. on Protecting Florida or Embargo

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By Katarzyna Klimasinska

Dec. 8 (Bloomberg) — Four U.S. inspectors armed with safety glasses and notebooks will set out on a mission next month to protect Florida’s beaches from a Cuban threat.

They’ll rendezvous in Trinidad and Tobago with the Scarabeo 9, a rig headed to deep waters off Cuba to drill for oil about 70 miles (113 kilometers) south of Florida’s Key West.

Repsol YPF SA is making the Scarabeo 9 available to the U.S. inspectors before the rig starts drilling closer to Florida than the BP Plc well that failed last year in the Gulf of Mexico, causing the biggest U.S. offshore oil spill. The exploration poses an environmental, political and diplomatic challenge to the U.S. more than 50 years after cutting off relations with Cuba’s communist regime.

The Obama administration’s dilemma is “what steps to take for environmental protection and how much to honor current Cuba policy,” Dan Whittle, Cuba program director at the New York- based Environmental Defense Fund, said in an interview.

In the aftermath of the revolution that brought Fidel Castro to power, the U.S. banned exports to Cuba in 1960, withdrew diplomatic recognition, backed the failed Bay of Pigs invasion in 1961 and imposed a full trade embargo in 1962.

Now generations of animosity between the two nations limit cooperation on safety standards and cleanup precautions for the Cuba drilling planned by Madrid-based Repsol, which would be followed by state-owned companies from Malaysia to Venezuela. A conference on regional oil-spill response being held this week in Nassau, Bahamas, may provide a forum for discussions by U.S. and Cuban representatives.

Juan Jacomino, a spokesman for the Cuban Interests Section at the Swiss embassy in Washington, declined in an interview to comment on drilling off of the island nation.

Spare Parts

Repsol can use the Scarabeo 9 without violating the U.S. trade embargo because it was built at shipyards in China and Singapore, and fewer than 10 percent of its components are American, according to its owner, Eni SpA.

The sanctions would block spare parts from the U.S. for the rig’s blowout preventer, a safety device that failed in the BP spill. The restrictions also require Helix Energy Solutions Group Inc. of Houston, which provides oil-spill containment equipment for Repsol in the Gulf of Mexico, to seek a waiver to do so in Cuban waters in case of an accident.

U.S. companies seeking to do business with Cuba must ask the Commerce Department, which considers most applications “subject to a policy of denial,” the agency says on its website. The Treasury Department weighs requests to travel from the U.S. to Cuba.

Granting too few permits for spill prevention and response would keep contractors from offering the technology and services developed after the BP spill, Lee Hunt, president of the Houston-based International Association of Drilling Contractors, said in an interview.

Cuban Exiles

Approving too many licenses would undermine the embargo, enriching a regime listed by the U.S. State Department as a nation supporting terrorism along with Iran, Sudan and Syria, according to anti-Castro lawmakers such as Republican Representative Ileana Ros-Lehtinen of Florida, who heads the House Foreign Affairs Committee.

U.S. “assistance, guidance and technical advice” to Repsol, including the planned visit to Scarabeo 9, may violate the law by “helping to facilitate” the company’s work and providing the Cuban government “with a financial windfall,” Ros-Lehtinen said in a Nov. 1 letter to President Barack Obama.

Ros-Lehtinen, who immigrated from Cuba with her family at age 8, is a leader among Cuban exiles in South Florida who have opposed easing U.S. restrictions. Florida, which has been a swing state in presidential elections, also has been a bastion of opposition to oil drilling that opponents say could despoil the beaches that are a prime draw for tourists.

Florida Drilling Foes

Lawmakers such as Senator Bill Nelson, a Florida Democrat, have fought to keep drilling out of U.S. waters in the eastern Gulf of Mexico bordering Florida.

Nelson and Senator Robert Menendez, a New Jersey Democrat, introduced a bill Nov. 9 that would require foreign companies drilling in Cuban waters to pay for damage to U.S. territory without liability limits. Senator Marco Rubio, a Florida Republican, joined as a cosponsor.

Oil from BP’s spill tarred beaches 150 miles away in Florida’s northwestern Panhandle.

Now Floridians are faced with drilling under the jurisdiction of Cubans, who “don’t have the resources” to control a blowout, Jorge Pinon, an energy consultant and visiting research fellow at the Cuban Research Institute at Florida International University in Miami, said in an interview.

“If the U.S. is not willing to help” in an emergency, “the resources are going to come from Canada, Norway and the U.K., and it will take a very long time,” said Pinon, who led Amoco Corp. units in Mexico City and retired from BP in 2003, according to his biography.

Repsol’s Contract

Repsol signed a contract with Cuba in 2000, according to the company’s website, and confirmed the presence of oil with a Norwegian rig in 2004. Repsol will drill in about 5,000 feet (1.5 kilometers) to 6,000 feet of water, about the depth of BP’s Macondo well, according to Pinon.

Petroliam Nasional Bhd., or Petronas, based in Kuala Lumpur; New Delhi-based Oil & Natural Gas Corp.; Hanoi-based Vietnam Oil & Gas Group, known as PetroVietnam; Caracas-based Petroleos de Venezuela SA; and Sonangol SA of Luanda, Angola, also hold Cuban blocks, Pinon said.

U.S. officials say they are doing all they can to ensure safe drilling off Cuba.

“We are quite focused, and have been for many, many months” on “doing anything within our power to protect U.S. shores and U.S. coastline,” Tommy Beaudreau, director of the Bureau of Ocean Energy Management, an industry regulator, said in a Nov. 29 interview at Bloomberg’s Washington office.

Wild Well Control

The administration has issued some licenses to U.S. companies to respond to a spill in Cuban waters, Mark Toner, a spokesman for the State Department, said in an e-mail. He didn’t say how many have been approved, and the Commerce and Treasury departments didn’t respond to e-mailed requests for comment.

Wild Well Control Inc. of Houston is one permit recipient, according to Hunt of the drilling contractors’ trade group. The company didn’t respond to e-mails and phone calls seeking comment.

“Helix plans to build a new subsea containment cap to safeguard drilling operations in Cuba,” Cameron Wallace, a spokesman for that company said in an e-mail about its request for U.S. licenses. “The cap and associated equipment will be staged at a U.S. port near to the drilling site to minimize response time.”

Walking the Deck

In their visit to the Scarabeo 9, two inspectors from the U.S. Coast Guard and two from the Interior Department will walk the deck and check generators, the positioning system and firefighting equipment, Brian Khey, who will be on the team, said in an interview.

The Americans will watch a firefighting simulation and conduct an abandon-ship drill, according to Khey, the supervisor at the Coast Guard’s Outer Continental Shelf National Center of Expertise in Morgan City, Louisiana,

While the visitors will discuss with Repsol any deficiencies they find, they won’t have enforcement powers, Khey said. Nor will they be able to check the blowout preventer or the well casing and drilling fluid that will be used on site, according to the Interior Department.

Scarabeo 9 was built “according to the latest and most advanced international standards available at the time of her design and construction,” Rome-based Eni said in an e-mailed statement. “Health, safety and environmental protection are always a top priority.”

Eni Subsidiary

The vessel “is one of the very few units in the industry which is using a technology which is not an American one,” Pietro Franco Tali, chief executive officer of Eni’s oilfield- services subsidiary, Saipem SpA, said on an Oct. 27, 2010, conference call.

One U.S. component is the blowout preventer, made by Houston-based National Oilwell Varco Inc. The company hasn’t applied for a license to do business with Cuba and doesn’t plan to, Chief Financial Officer Clay Williams said in a phone interview.

That means rig operators will have to seek training and spare parts in Europe or Asia, according to Hunt, whose group represents 1,494 companies including Saipem.

“It’s like buying a Mercedes and being told you have to go to a Ford dealer for parts,” Hunt said in an interview.

The results of Cuba’s drilling may affect U.S. energy policy. Success would put pressure on the U.S. to open its waters surrounding Florida for exploration, Pinon said.

A serious accident off of Cuba could throw the industry out of the Gulf of Mexico, according to Brian Petty, executive vice president for governmental affairs of the drilling contractors’ group.

“A mess” in Cuban waters would lead critics of drilling to say, “Stop it, don’t let it go on anywhere,” Petty said.

–With assistance from Nicole Gaouette in Washington and Nguyen Dieu Tu Uyen in Hanoi. Editors: Judy Pasternak, Larry Liebert

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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