Cuba Libre—Will Improving Relations Free Up Offshore Oil and Gas?

The half-century stand-off between the U.S. and Cuba appears to be ending, and improving relations could, over time, bring experts in Gulf of Mexico oil and natural gas exploration and production to the waters off Cuba’s northern coast. A lot of questions remain, though, chief among them how extensive Cuba’s offshore reserves really are and—just as important—how long it might take for a still-Communist Cuban government to warm up to working with energy-sector capitalists. Today we consider the long-term potential for hydrocarbon development in Cuba’s corner of the Gulf.

We know, we know—there are far more immediate concerns for the energy sector than the recent thaw in relations between the U.S. and Cuba. After all, crude oil prices are dipping below $50/Bbl, exploration and production companies (E&Ps) are scaling back their 2015 drilling plans, and natural gas processing has flipped from a profit center to money loser. It’s also important to remember, however, that this too will pass, and that before long (well, maybe in a year or two—or three) E&Ps will be back on the hunt for the next big play. The focus of that hunt will likely still be promising onshore plays like the Tuscaloosa Marine Shale (see our recent Timing Is Everything—Can the TMS Survive the Oil-Price Plunge?). But as we said in Tubular Bells—Gulf of Mexico Gains Exorcising Macondo’s Ghost, the Gulf of Mexico (GOM) offers vast amounts of oil that, once tapped, produces reliably for decades. And, depending on whom you believe, the North Cuba Basin (and especially the offshore parts of it; see Figure #1) may contain as much as 20 billion Bbl of undiscovered oil (says Cuba), and probably contains at least 4.6 billion Bbl (says the U.S. Geological Survey - USGS), with 3.2 billion Bbl of the 4.6 billion Bbl in the North Cuba Foreland Basin AU—the narrow band at the center outlined only in red. (USGS also thinks Cuba has 9.8 Bcf of natural gas and 900 MMBbl of natural gas liquids.) According to Cubapetroleo (CUPET), the state-owned oil and gas company, the undersea geology of Cuba’s oil belt has a lot in common with two of Mexico’s best GOM oil plays: the Cantarell and Poza Rica fields in the Bay of Campeche. (The Cantarell field, which was discovered in 1976, produced more than 1 MMb/d through most of the 1980s, ‘90s and early ‘00s before winding down in recent years. 

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