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Cuba signs deal to drill for gulf oil

An Indian company - U.S. companies are barred by sanctions -will explore the North Cuba Basin.

By TIMES WIRES
Published September 12, 2006


India's biggest state-controlled oil exploring company has won permission from Cuba to drill for crude in its waters, part of an effort by the Caribbean island's communist regime to become oil self-sufficient in coming years.

Financial terms of the agreement weren't disclosed. But the deal to explore Cuba's Gulf of Mexico waters for oil comes at a time when U.S. companies and politicians are concerned over exploration in the area.

India's Oil & Natural Gas Corp. will seek oil in the N-34 and N-35 blocs of Cuba's economic exclusive zone in the Gulf of Mexico, state-controlled oil company Union Cuba Petroleo said. ONGC, as the Indian company is known, becomes the seventh company to explore for oil offshore in Cuba.

Cuban President Fidel Castro partly opened the industry to foreign investment in June 1999 to cut dependence on imports of oil after years of power blackouts and fuel shortages. Castro, 80, aims to save about $1-billion this year by reducing electricity in households and factories and giving a better, more efficient use to the nation's existing energy resources, in a move that he dubbed "the energy revolution."

The blocs have an estimated size of about 1,660 square miles and are located in western Cuba, according to a report by Cuba's state news wire AIN.

Exploring for oil 90 miles off the coast of Florida has set off a political debate over whether U.S. companies, sidelined by sanctions, should be allowed to explore there. Some Florida lawmakers say they are worried about environmental damage and the potential threat to Florida's tourism industry, and want companies exploring with Cuba punished. The U.S. Geological Survey estimated that the North Cuba Basin could contain some 4.6-billion barrels of oil.

(Last week, Chevron and two oil exploration partners said they found what may be between 3-billion and 15-billion barrels of oil and natural gas liquids in deep gulf waters 170 miles southwest of New Orleans.)

U.S. companies are barred from exploring for oil in Cuba's offshore zone opened for foreign exploration in 1999 under trade sanctions enforced against Castro's government since 1962.

Cuba produces about 80,000 barrels of oil a day of heavy crude with a high content of sulfur, which it uses mainly to generate electricity, according to data by Cuba Petroleo, known as Cupet.

The country meets most of its petroleum needs thanks to an energy accord signed with Venezuela in 2002, in which the South America nation sells about 100,000 barrels of oil a day to Cuba at preferential prices.

Cuba plans to drill for oil in its portion of the Florida Straits. The Cuban government invited U.S. companies to bid, the New York Times reported in May, adding that bids would have run afoul of the U.S.'s trade embargo against the communist-run island.

Other foreign companies operating in Cuba's oil industry are Repsol-YPF SA, Malaysia's Petroliam Nasional Bhd and Sherritt International Co. of Canada.

The Cubans also agreed this year with Petroleos de Venezuela SA to upgrade the Cienfuegos refinery in the Caribbean island in a joint venture.

Information from Bloomberg News and other Times wires was used in this report.

[Last modified September 11, 2006, 23:04:10]


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