HAVANA, 5 December (By Wilfredo Cancio Isla Café Fuerte) The company MEO Australia Limited will join the onshore oil exploration effort in Cuba after signing a production sharing contract with the Cuban state oil company Cupet. The Australian firm announced Thursday the signing of the agreement with Cupet after a negotiation process that lasted two years. It allows for exploring the Block 9 oilfields on the north coast of Cuba.
The start of operations is subject to final regulatory approval. “MEO has been in talks with CUPET since early 2013 when it was classified as a potential oil operator on land and in shallow waters. Block 9 was always a favorite of MEO due to the confirmed presence of hydrocarbons and proximity to production and existing infrastructure, “said a statement from the firm, based in Melbourne.
New oil approach
The signing with MEO is part of the new approach to Cuban oil exploration, which has chosen to turn the page on the once highly touted projects for deep-water drilling and concentrate on producing wells on land after several unsuccessful attempts in the Gulf of Mexico.
MEO joins the Russian state-controlled Rosneft and the Chinese National Petroleum Company (CNPC), which earlier this year agreed to extract more heavy crude and support horizontal drilling of new wells on the northwest coast of the island, but without signing agreements for deep-water drilling in the so-called Exclusive Economic Zone in the Gulf of Mexico, an area of 112,000 square kilometers divided into 59 blocks.
Rosneft, CNPC and now MEO, join efforts for heavy oil extraction with the Canadian company Sherritt International, a pioneer of foreign investment in Cuba, and Zarubezhneft, the second state oil company in Russia. The MEO exploration program is divided into four sub-periods for a total of eight and a half years with an option that the Australian company can withdraw from the project whenever they complete a stage.
The work plan includes a commitment negotiated for an initial period of 18 months during which seismic data will be evaluated and reprocessed before the company decides whether to continue with a 24-month exploration phase.
The block selected by the Australians covers approximately 2,380 square kilometers, at the height of the villages of Corralillo and Rancho Veloz, about 130 kilometers east of Havana.
It is very close to the Varadero area and includes the Motembo field, which was the first Cuban oil field, discovered in 1881. The strip of heavy oil in northern Cuba has an area of 320 kilometers and covers about five kilometers offshore. The extracted oil is highly viscous, with a recovery factor of only 10%, but serves to cover 40 percent of the country’s needs, with about four million tons annually.
The geology of Block 9 is analogous to oil systems where the technical staff of MEO has significant experience, a key factor in the company’s request application being accepted by the Cuban authorities, believes the company. “We see great potential in Cuba and in particular, in Block 9 and look forward to working closely with Cupet for mutual benefit,” said Jürgen Hendrich, president of MEO.
But there are several questions about the involvement of MEO and the financial resources available to invest in the island.
Worrisome financial statement
MEO is a small public exploration and production company with operations only in Australia, New Zealand and other islands of Oceania. Apparently, this is the first time that the firm ventures out of its traditional area of operations.
According to its latest financial reports, consulted by CaféFuerte, MEO’s capital is limited. Its assets plummeted from $159,810,505 Australian dollars in 2013 to $26,728,457 in 2014, when it reported net earnings of only $293.425 dollars.
The price of its shares on the stock market are only $ 0.02 cents Australian dollar. (One Australian dollar = 0.83 USD). The Cuban government is eager to revive the hope of abundant oil on the island, which vanished in 2012 after the drilling of three wells in deep waters without satisfactory results.
Unsuccessful attempts were made by Repsol (Spain), PDVSA (Venezuela), PC Gulf (Malaysia) and Gazpromneft (Russia). After the fiasco, all companies that had contracted deep-water blocks withdrew from Cuba, with the exception of PDVSA and the Angolan Sonangol. Cuba promoted its Exclusive Economic Zone in the Gulf of Mexico as having a potential up to 22,000 million barrels, but other estimates put it at between 5,000 and 9,000 million.