Scarabeo 9 cuba drilling semi-submersible deepwater repsol yantai raffles

5 Billion Barrels of Undiscovered Oil: US delegates head to Cuba to discuss deepwater ambitions

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September 4, 2011

Scarabeo 9 cuba drilling semi-submersible deepwater repsol yantai raffles

Liberian-flagged and DNV-classed, Scarabeo 9 is a semi-submersible drilling vessel recently built by Yantai Raffles.  It will be on contract by Repsol YPF for deepwater exploratory drilling off Cuba.  

WASHINGTON -(Dow Jones)- Oil spill commission co-chief Bill Reilly is heading to Cuba next week to help evaluate that country’s plans for developing its oil resources, Dow Jones Newswires has learned.

The trip represents an important development in a thorny situation that has U.S. lawmakers raising concerns about potential oil spills and oil experts pressing the Obama administration to grant exemptions under the decades-long embargo.

The trip, which will involve a delegation of U.S. oil-drilling experts and environmentalists, coincides with Cuba’s effort to develop its offshore oil resources as a way to wean itself off imports from Venezuela. U.S. officials believe Cuba’s waters could contain more than 5 billion barrels of undiscovered oil.

Cuba’s efforts to tap its offshore oil will get off the ground later this year, when a consortium led by Spanish company Repsol YPF S.A. (REPYY, REP.MC) is expected to begin drilling a well in more than 5,500 feet of water off the country’s northern coast. If Repsol finds oil, it could touch off a quick-moving race to set up production in Cuban waters.

The delegation to Cuba, involving the International Association of Drilling Contractors and the Environmental Defense Fund, is on a fact-finding mission to determine the country’s long-term plans for pursuing its oil resources and identify steps to ensure safety and environmental protection. They’re scheduled to depart Monday.

The process of oil drilling in thousands of feet of water is “inherently risky,” said Daniel Whittle, Cuba program director at the Environmental Defense Fund and a member of the delegation. “We believe it’s imperative that if and when Cuba drills, they get it right.”

Reilly, as co-head of President Barack Obama’s oil-spill commission, helped to draft a report earlier this year that recommended U.S. officials work with Cuba and Mexico to develop shared standards for drilling in the Gulf. The oil-spill commission ceased operations in March after completing its work.

Cuba’s effort to promote drilling in its waters is presenting a thorny situation for U.S. lawmakers, regulators and companies.

Among the loudest critics of Cuba’s plans are Gulf Coast lawmakers who are raising questions about the country’s ability to respond to oil spills and the risks of crude oil washing on U.S. shores. Rep. Vern Buchanan, a Florida Republican whose district faces the Gulf of Mexico, introduced a bill earlier this year to allow the Interior Secretary to deny U.S. oil exploration and development leases to companies that do business with Cuba.

“The United States is not going to see a drop of that oil,” said Max Goodman, a spokesman for Buchanan. “And we have learned from Deepwater Horizon that an oil spill can devastate a regional economy and pose long-term damage to our natural resources.”

Repsol will be drilling in waters that are deeper than those in which the Deepwater Horizon rig operated at the time it exploded last year. Repsol will be using a Chinese-built drilling rig that only recently left Singapore for Cuban waters. The rig is expected to arrive in November or December.

The rig, known as Scarabeo 9, was built to conform with the U.S. embargo and Repsol has said it will be following U.S. safety standards, Repsol representative Kristian Rix said.

“We are confident that we have the right personnel and materials to drill safely and successfully in the area,” Rix said.

If oil is discovered, Cuba has a greater chance of becoming less dependent on Venezuela for its energy needs. In 2009, the country produced roughly 50,000 barrels of oil a day from onshore and coastal wells, relying on imports to supply an additional 130,000 barrels to meet consumption levels, according to the Energy Information Administration.

Given the risks of an oil spill, oil and natural gas experts are urging the Obama administration to grant exemptions under the embargo to allow U.S. companies and experts to respond to a disaster. U.S. companies, such as Helix Energy Solutions, have been particularly aggressive in developing oil spill containment systems in the wake of the BP Plc (BP, BP.LN) spill.

Allowing U.S. companies and experts to respond to a Cuban spill would be in the U.S.’s best interest, given the proximity of the drilling to U.S. shores, said Jorge Pinon, former president of Amoco Oil Latin America and visiting research fellow at Florida International University.

“There is an experienced company doing the work [in Cuba]” Pinon said. “What we’re lacking is, in the case of an emergency, Repsol and the other operators will not be able to access the resources” in the U.S.

-By Tennille Tracy, Dow Jones Newswires

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