Global Energy Advisory, Oil & Energy Insider:
As the US and Cuba work to restore diplomatic relations, keeping in mind that we are doubtful the US trade embargo on Cuba will be lifted until after the 2016 presidential elections, Cuba is flaunting what it says are billions of barrels of oil in its offshore Gulf of Mexico territory.
So far, there isn’t a great amount of excitement over Cuba’s announcement. In 2012, three exploration wells came up dry and, at present, most are eyeing new opportunities in Mexico since it opened up its oil and gas to foreign companies and ended state-run Pemex’s monopoly on the industry. Depressed oil prices will also keep interest in Cuba to a minimum.
Still, a recent study does claim to confirm what Cuba has long said was a potential oil and gas bonanza—20 billion barrels of undiscovered crude, more specifically. The most recent US Geological Survey data estimates around 7 billion barrels.
For now, Venezuela’s state-run PDVSA is one of two companies that still has exploration rights in Cuba, but at the same time, Cuba would love to reduce its dependence on Venezuela all around. The other company is Russia’s state-run Zarubezhneft.
Cuba’s oil production right now is sparse. It produces 40% of its oil needs from an onshore/offshore heavy oil belt, but this is poor quality fare.
While interest appears to be lacking, contradictory reports have emerged that France’s Total SA is pursuing something in Cuba. Some reports claimed that Total earlier this month signed an agreement to explore offshore oil with Cuba’s state-run CubaPetroleo (Cupet). This has been confirmed by Cuban state media, but denied by Total, which has previously explored in Cuba but left in 1995. There may simply have been a misunderstanding on the part of the media as to the nature of the agreement signed by Cuba and Total.
And then we have reason to believe that Russia is eyeing a re-emergence in Cuba, with Russian officials indicating that Cuban oil is high up on the agenda in the Kremlin. Moscow will seek to keep Cuba in its orbit in the face of a change in diplomatic relations between Cuba and the US. Russia’s Gazprom Neft acquired a 30% stake in four Cuba blocks in 2011.
For the purposes of this report, however, we are most interested in what will happen when the trade embargo is lifted. What we expect is that some savvy US or Canadian junior oil companies will hit this scene before the supermajors build up enough interest. They will develop some new exploration projects and then set themselves up to be taken over by a supermajor. It could be another story similar to what’s going down with Argentina’s shale right now. By Global Energy Advisory, Oil & Energy Insider.
Oil production in Saudi Arabia and Russia set records. US drillers aren’t backing off either. Glut gets worse. Read… Saudi Arabia, Russia in No Mood to Cave to US Fracking Boom