Companies Abandon Search for Oil in Cuba’s Deep Waters

cuba_oilAfter spending nearly $700 million during a decade, energy companies from around the world seem to be ready to abandon their search for oil in deep waters off the north coast of Cuba near Florida, “a blow to the Castro regime but a relief to environmentalists worried about a major oil spill.” Decisions by Spain-based Repsol and other companies to drill elsewhere greatly reduce the chances that a giant slick along the Cuban coast would ride ocean currents to South Florida, threatening its beaches, inlets, mangroves, reefs and multibillion-dollar tourism industry.

The Coast Guard remains prepared to contain, skim, burn or disperse a potential slick. And Cuban officials still yearn for a lucrative strike that would prop up its economy. A Russian company, Zarubezhneft, is drilling an exploratory well in shallower waters hugging the Cuban shoreline south of the Bahamas. But though some oil has been found offshore, exploratory drilling in deep waters near currents that rush toward Florida has failed to reveal big deposits that would be commercially viable to extract, discouraging companies from pouring more money into the search.

“Those companies are saying, ‘We cannot spend any more capital on this high-risk exploration. We’d rather go to Brazil; we’d rather go to Angola; we’d rather go to other places in the world where the technological and geological challenges are less,'” said Jorge Piñon, an oil-industry analyst at the University of Texas who consults with U.S. and Cuban officials as well as energy companies. “I don’t foresee any time in the future exploration in Cuba’s deep-water north coast. It is, for all practical purposes, over.”

Despite these frustrations, Cuba’s need for oil wealth and energy independence has only intensified. Venezuela [. . .] may quit sending $3.5 billion worth of oil to Cuba each year under a barter arrangement initiated by the late Venezuelan President Hugo Chávez, an ally of Fidel and Raúl Castro. Venezuela has been sending oil to Cuba at favorable prices, with part of the cost paid through low-interest loans and the rest offset by services from Cuban doctors, teachers and advisers — a sweet deal for the Castro regime that meets the island’s energy needs and fuels its struggling economy.

[. . .] Florida leaders for years have fended off oil drilling within 125 miles of Florida’s Gulf Coast for fear a spill would damage the environment and the state’s $65 billion tourism industry.

Those fears were heightened when the Deepwater Horizon spill in 2010 spewed 210 million gallons of oil into the Gulf, ruining that summer’s tourist and fishing season along the Florida Panhandle and polluting coastal waters in ways that are still being measured. In the aftermath, drilling north of Cuba just 70 miles from Florida set off new alarms and prompted the Coast Guard to devise contingency plans to fend off a potential slick.

[. . .] Repsol, a Spanish company, had been looking for oil off the shores of Cuba for more than a decade, hoping for a big strike that could generate billions of dollars of profit. The company brought a gigantic self-propelled floating rig — the Scarabeo 9 — all the way from Singapore to drill an exploratory well in ultradeep waters of more than 5,000 feet north of Havana in January 2012. The well produced signs of oil. But by May 2012, the company concluded it wasn’t enough to justify the cost and difficulty of extraction through a complex and porous underwater rock structure. Now Repsol is closing its Cuban offices and moving elsewhere. [. . .]

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