Oil in Cuba (Part II)

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Granma | 06 October, 2016

While 99% of Cuban oil is produced on the island’s northern coast, there are geological features indicative of oil throughout the island. Photo: Courtesy of Cupet

Continuing the analysis begun in the pages of Granma International last week, we will now focus on oil exploration and drilling in Cuba, two processes which constitute the backbone of the industry worldwide.

Before getting into details of how fossil fuels are obtained, or could be obtained, on the island, it’s worth recalling that exploration only allows for estimates about the existence of underground deposits; information is not obtained directly.

Since there is no technology or equipment that determines the presence of hydrocarbons, oil exploration is a risky business, with 80% of exploration conducted with the use of seismic techniques.

According to Osvaldo López Corzo, head of exploration for the Cuba Petroleum Enterprise Group (Cupet), exploratory wells strike oil between 8-20% of the time. In other words, for every five to 12 wells drilled, only one is successful.

Nevertheless, without exploration, there are no new fields. The geologist López insists that oil companies are obliged to take the risks implicit in exploration.

He explains that drilling is conducted to explore unknown areas, or further develop fields in use, and that these efforts are concentrated on the earth’s land surface, where sedimentary rock storing 90% of the planet’s hydrocarbons is located.

Taking into account the most advanced research available, a practice was introduced in Cuba at the end of the 1990s that revolutionized the oil industry here: horizontal drilling. López explained that in a field where a vertical well produces 100 to 200 barrels a day, a horizontal well can extract 2,000 barrels in the same amount of time.

Logically, from this moment on, all Cuban wells were drilled horizontally or almost horizontally, although this is a more complicated process. Currently, the majority of these reach a length of over 6,000 meters.

Thus it was economically feasible for a barrel of crude, costing 13 to 14 USD to produce, to be sold at 30 USD, and to use almost all of the 75,000 barrels produced daily to generate electricity, meeting half of the country’s demand for electrical energy.

Foreign investment is key to offshore exploration in Cuban waters. The Photo: Courtesy of Cupet

Given that, over the last 12 years, Cupet has maintained only a stable level of production, and that the productivity of wells which have been in operation for more than a decade tends to decline, greater volumes are needed to meet the national economy’s needs – greater volumes which can be obtained via the deepening of some wells and by attracting foreign investment.

Cupet is in constant contact with international companies to promote exploratory projects within the country or territorial waters, in an effort to increase the production of hydrocarbons.

Ninety-nine percent of Cuban oil comes from the Heavy Crude North Coast Field, which includes an area of 750 square kilometers between Havana and Varadero (Matanzas), and Cupet plans to continue exploring since estimates indicate that there are some 11 million more barrels available there, López explained.

Given that Cuban crude is heavy and of high-viscosity, only five to seven percent of the oil underground is extracted, a figure known as the “recovery coefficient.”

Wells produce primarily with the oil flowing to the surface on its own, or with the use of different types of pumps. When the oil cannot be extracted either way, enhanced recovery methods are used, like the injection of water, chemical products, steam, or foam, which according to López Corzo, require costly financing.

Cupet adjunct director, Roberto Suárez Sotolongo, recalled that the northern field has been exploited for more than four decades now, producing more than 245 million barrels over the last 15 years.

López reported that while exploratory wells have been drilled more than 500 kilometers to the east of the North Coast Field, the majority of such activity through 2020 will be concentrated between Havana and Santa Cruz del Norte, an area which offers a high probability of striking oil, estimated at 17 to 18%.

This is possible thanks to the discovery – via exhaustive 3D seismic studies – of geological structures indicative of oil in the known fields of Boca de Jaruco, Santa Cruz, Canasí, Puerto Escondido, Yumurí, Seboruco and Varadero.

Petroleum experts have divided Cuba into two regions: North and South. While, as previously noted, most Cuban oil is produced in the northern region, there are surface features indicative of oil throughout the island, features which make visible underlying geological formations and the location of bedrock. Such characteristics exist, for example, in the provinces of Pinar del Río and Las Tunas.

According to Osvaldo López Corzo, head of exploration for Cupet, for every five to 12 exploratory wells drilled, only one is successful. Photo: Jorge Luis González

Over the next five years, five or six exploratory wells will be drilled on land, and others will be drilled in areas where oil is discovered. Since the pressure is on to find deposits outside of the North Coast Field, exploration throughout the island is being followed closely.

Without projecting the use of hydraulic fracturing or fracking, which raises serious environmental concerns, Cupet is beginning extraction of non-conventional resources, and the use of non-conventional techniques.

This includes recovery of dense crude oil in highly porous rock above oilfields, which has escaped the deeper reserves.

Along these lines, Cuba has begun to use thermal methods (injecting steam to reduce viscosity and increase fluidity) and multi-connection wells are being planned, where they do not threaten the water table.

Experts agree that the best way to increase the production of natural gas is to increase the extraction of oil and obtain the accompanying gas, also a useful fuel.

Cuba’s offshore zone includes three parts: the Exclusive Economic Zone in the Gulf of Mexico; the East-Central Exclusive Economic Zone bordering Bahamian territorial waters; and the southern sea.

The most studied among these areas, with the most potential within a mega-basin well-known for its reserves, is that off the coast of Mexico.

This is not the best time for Cuba to do business in the oil industry, but Cupet does have the Canadian company Sherritt as a longstanding partner and investor.

Likewise companies in Russia, Britain, Spain, Portugal, the U.S. and Japan are currently evaluating blocks and data in both sea and land areas, which could lead to the signing of contracts in 2017.

López emphasized that the company must seek investors to operate offshore fields, since Cuba simply cannot afford them. Such foreign investment is decisive, he explained, since the cost of just one well in water 1,500 meters deep can be 200 to 300 million dollars.

“The complications lie in that, to find any deposit, at least 10 wells must be drilled, and add to this the cost of installations underwater, on the surface, or floating, plus that of operations,” he said.

López continued explaining that if the cost of production of a barrel of oil in Cuban waters is 20 to 30 USD, and is sold on the world market for 45-50 USD, the profitability of such efforts would be low.

He added that Cupet has planned a land campaign as well, south of currently operating oilfields, with the goal of finding deeper deposits, with perhaps less volume, but better quality crude. Beginning this year, López reported, two-dimensional seismic studies will be conducted in an area of some 575 square kilometers, at a cost of 40 million dollars.

SOURCE: http://en.granma.cu/cuba/2016-10-06/oil-in-cuba-part-ii

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