Brazil's Petrobras to search for oil offshore Cuba

Fri Oct 31, 2008 5:57pm EDT
By Rosa Tania Valdes
HAVANA (Reuters) - Brazil's state-owned oil company Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz) signed an agreement on Friday to explore for oil in Cuba's untapped offshore fields, which Cuban energy officials say may hold over 20 billion barrels of reserves.
Brazilian President Luiz Inacio Lula da Silva and Cuban President Raul Castro attended the signing ceremony and both expressed confidence that plenty of oil will be found.
"God can't be so unjust that we won't find anything," Castro said.
"Don't worry, Raul," Lula told him. "We're going to find it here and we're going to transform it into energy." Petrobras is one of the world's top offshore oil producers.
The signing ceremony was part of a quick visit by Lula, who also met ailing former Cuban leader Fidel Castro and told reporters that, at his invitation, Raul Castro will attend a Latin American summit in Brazil in December.
President Castro said Lula, making his second trip to Cuba this year, was only supposed to chat with Fidel Castro for 15 minutes but they ended up meeting for almost two hours.
Fidel, 82, has not been seen in public since undergoing surgery for an undisclosed intestinal ailment in July 2006.
A big oil find could bring new prosperity to Cuba, which currently produces 60,000 barrels per day from offshore wells, but imports 90,000 bpd from Venezuela.
State-owned Cubapetroleo, or Cupet, surprised the oil world two weeks ago when it said it believes it has at least 20 billion barrels of oil offshore -- more than the generally accepted top estimate.
Cupet said the figure was based on comparisons with similar geological structures in nearby U.S. and Mexican waters.
Outside experts say such numbers are not impossible but no one can know until drilling takes place.
Only one test well has been drilled off Cuba's coast, by a consortium led by Spanish oil company Repsol-YPF (REP.MC: Quote, Profile, Research, Stock Buzz), which is expected to drill a second well next year.
"I have full confidence that we're going to find oil for various reasons -- because the others (U.S. and Mexico) have oil, because we are already extracting some and due to the capacity of the Brazilian company," said Raul Castro, who formally replaced his brother as president last February.
Cuba has divided its offshore area in the Gulf of Mexico into 59 blocks, 29 of which have been leased for exploration to companies from around the world, but not the United States which maintains a trade embargo against Cuba.
The fields include onshore wells that use horizontal drilling to draw oil from reservoirs several miles offshore.
Petrobras' block off Cuba's northern coast east of Havana covers 600 square miles (1,600 square km) and includes waters 1,640 feet to 5,250 feet deep.
Petrobras will make an initial investment of $8 million to begin analysis of its block. The contract gives the Brazilians seven years to explore and 25 years to produce oil and gas in a production-sharing contract with Cuba.
(Additional reporting by Nelson Acosta; Editing by Tom Brown)