CUBA HAS FIRST OFFSHORE OIL FIND; MORE WELLS ON TAP

Cuba has its first offshore oil discovery, and more exploratory drilling is getting under way off the Western Hemisphere's sole Communist nation.

Two Canadian companies are evaluating their significant heavy oil discovery on a large structure off Matanzas province in the Bay of Cardenas (OGJ, June 6, Newsletter).

The 1X Cupey discovery well was spudded in mid December 1993 in about 20 ft of water on Block 10, a 300 sq km tract acquired Mar. 16, 1992, by Sherritt Inc. unit Canada Northwest Energy Ltd. (CNE), Calgary, and Fortuna Petroleum Inc., a unit of Talisman Energy Inc., also of Calgary, under a production sharing contract (PSC) with state oil company Cubapetroleo SA (Cupet).

Meantime, France's Total was expected at presstime last week to spud the first of two wildcats on Block 3 in the Santa Clara area off Cuba's northern coast.

CUBA'S OIL STATUS

The activity marks the latest progress in Cuba's effort to ramp up oil production in the wake of a cutoff of supplies of subsidized crude oil and refined products from the former Soviet Union (FSU).

Loss of those subsidized imports, which as recently as 1989 totaled a combined 270,000 b/d, figures heavily in Cuba's current economic woes (OGJ, Apr. 26, 1993, p. 58).

Cuba in 1993 produced about 7.9 million bbl of oil, or an average of more than 21,500 b/d. Production by yearend is expected to surpass 25,000 b/d. When the Soviet Union in 1989 began curtailing oil and products exports to Cuba, the island nation's production had dropped to 15,000 b/d from about 19,000 b/d in 1986 (OGJ, July 6, 1992, p. 64).

Since the FSU oil supply cutoff, the government has been forced to ration gasoline and electricity and had limited success in obtaining oil from abroad via barter and other deals. Scores of factories have been closed or operated at sharply reduced capacity, and harvests of Cuba's maimstay export, sugar, have been hit hard.

The country's economy has all but collapsed in recent years, contributing to rising local dissatisfaction with President Fidel Castro's regime.

Thus the prospect of rising Cuban oil production has significant geopolitical implications, especially for the U.S., which has maintained a trade embargo against Cuba for 30 years and forbids U.S. companies from investing there. Even if crude production doesn't rise quickly, significant oil discoveries could bolster Cuba's efforts to obtain foreign credits and loans.

Complicating the picture are the claims by some U.S. companies stemming from the nationalization of U.S. interests after the Cuban revolution. Some of the acreage covered by current exploration and production contracts in Cuba had been awarded to U.S. companies prior to nationalization.

Among other companies with exploration interests in Cuba are Sweden's Taurus Petroleum AB and Brazil's Braspetro, a unit of Petroleo Brasileiro SA.

CUPEY STRIKE

After reaching 10,670 ft TD in late April, CNE's 1X Cupey wildcat last month flowed 3,750 b/d of 16 gravity oil through a in. choke with 1,488 psi flowing tubing pressure from a 440 ft lower Cretaceous interval at about 7,875 ft. Drilling was suspened for reservoir evaluation.

CNE released the Stainton Ltd. Atena jack up, scheduled to drill two wells on a nearby tract for a unit of Total. CNE expects to continue testing 1X Cupey when the rig returns, likely in first quarter 1995.

Cuba's first offshore oil production could begin soon thereafter. Block 10 operator CNE and Fortuna are to receive 60% and 40%, respectively, of the PSC holders' share of future production. Officials did not disclose what the production split with Cupet will be.

CNE's 1X Cupey is Cuba's first offshore discovery and only the second wildcat drilled in the Bay of Cardenas. Gulf Oil Corp. in 1948 drilled a Hicacos formation test that was abandoned as a dry hole with some oil shows.

Based on seismic confirmation of the structure indicated by Gulf's Hicacos wildcat, Soviet officials in the 1980s began plans to reenter the well.

Plans included several directional delineation/development wells from a piled platform set in shallow water about 100 ft west of Gulfs wellsite. Soviet workers in the late 1980s installed the Hicacos platform in the northern end of the bay but never drilled a well from it.

CANADA NORTHWEST PLANS

CNE apparently will play an important role in Cuba's oil production strategy. In addition to the PSC on Block 10, it holds:

A 100% interest in Block 23, an onshore tract acquired through a PSC awarded in March 1992.
An interest in Total operated Block 9, an onshore tract just south of Block 3 acquired through a PSC signed Dec. 2, 1992.

In addition, CNE is to receive an undisclosed portion of the incremental production gain resulting from well stimulation and workover programs in three areas: Boca de Jaruco field, Varadero producing area, and Pina field.

CNE has reworked about 60 wells in the three areas since Cupet awarded the PSC covering the deal in March 1992.

CNE was acquired in 1991 by Sherritt Gordon Ltd., a mining concern that produces nickel in Cuba.

TOTAL DRILLING

The Atena jack up is on site to drill the first of two wells for Total on Block 3, 160 km east of Havana. Drilling is expected to take 4 5 months.

Total acquired 770 line km of seismic survey data on the 2,000 sq km block, in which it holds an 85% interest and Fortuna 15%. Total is negotiating to assign a 20% interest out of its holding in the block to an undisclosed foreign company.

There are no current drilling plans for Total's other Cuban acreage, Block 9, which covers 2,900 sq km and lies mostly onshore. Total is analyzing existing seismic data for that block but has not conducted seismic surveys of its own there.

Total is operator with 45% in association with CNE 27.7% and Fortuna 22.3%.