OilVoice - Cold War Allies Cuba and Russia Sign Offshore Oil Contracts

Cold War Allies Cuba and Russia Sign Offshore Oil Contracts

Thursday, July 30, 2009

Former Cold War allies Russia and Cuba have reignited their friendship by signing oil exploration contracts to search for oil in Cuba’s offshore territory in the Gulf of Mexico.

Four oil-related contracts were signed between the two nations during the visit of Deputy Russian Prime Minister Igor Sechin to the island this week.

The contact signed between Russian oil company Zarubezhneft and state-owned firm Cuba Petroleo “set the bases for work in (Cuba’s) exclusive economic zone in the Gulf.” Cuba Petroleo has a monopoly on the nation’s offshore fields.

In tandem with the signing of the contracts Russia has extended a $150 million credit to Cuba, in what would appear to be a good-will gesture. The credit is to be provided over a period of two years and is set to be used to fund purchases of both construction and agricultural equipment to be used rebuilding areas hit hard by three hurricanes in 2008.

Earlier this year the Caribbean island gave Russian oil companies first refusal of 15 blocs to lease in the Gulf of Mexico.

Cuba is reported to have as much as 20 billion possible barrels of oil reserves in its deep offshore fields. So far however, only one test well has been drilled.

However, a U.S. Geological Survey (USGS) recently estimated that figure significantly lower at 9 billion barrels of recoverable oil and 21 trillion cubic feet of natural gas – within the zone, in the North Cuban basin.

The completed well was drilled back in 2004 and is situated off of Cuba’s northern coastline near Havana. According to the operator, Spain’s Repsol-YPF the spudded well showed traces of oil, but the company has not yet drilled a long-promised second well in the field.

Cuba’s share of the Gulf of Mexico seabed was established back in 1977 when it signed treaties with both the United States and Mexico.

The Latin nation has divided its offshore territories into 59 blocks, 21 of which are already under contract with a total of seven separate companies.

At present Havana imports more than hall of it oil, mostly at a considerably subsidised price from Hugo Chavez’s Venezuela.

The two nations have steadily been working to revitalise relations that went cold following the collapse of the Soviet Union back in 1991.

Deputy Prime Minister Sechin was also quick to highlight the importance of the bilateral cooperation between the two nations.