Cuba eyes export of local heavy crude oil

HAVANA, June 19 (Reuters) Cuba is increasing exploration along its northwest heavy oil belt with an eye to exporting local crude, the country's basic industry minister said at the weekend.

Foreign industry sources said earlier this year they were told some production would be exported and shipping sources said ''a few'' tankers had already been sent to the Far East.

Cuba is working to phase out oil-fired power plants in favor of large diesel generators and gas-fired plants while at the same time more than tripling vertical drilling from shore.

''Since the power plants are already consuming less and savings could increase in the state sector, increased crude production could be exported for the benefit of the national economy,'' Minister Yadira Garcia said in a speech on Saturday which was reported by the official news agency.

Cuban President Fidel Castro said earlier this year the government had leased eight modern Chinese drilling rigs which were working the coast, with the number expected to increase to 12 by the end of the year. Minister Garcia said she expected 18 rigs at work in 2007.

Castro said Cuba was more interested in natural gas than discovering more crude which he implied could be exported.

A year ago there were only five rigs operating along the northwest heavy oil belt, an 80-mile (128-km) stretch of coast in Havana and Matanzas provinces which produces all of Cuba's 60,000 barrels per day of heavy crude with a density rating of 8 API to 18 API and with a high sulfur content.

Most new wells are drilled vertically from the shore from two to seven kilometers out to sea.

The poor-quality oil is burned in modified power plants and factories.

Cuba imports 98,000 bpd of oil and derivatives, with preferential financing, from Venezuela.

The two countries recently formed a joint venture to refurbish and operate a long-dormant Cuban refinery that will process additional Venezuelan oil for the local market and export to the Caribbean.

Canadian companies Sherritt International and Pebercan Inc., in conjunction with state-run Cubapetroleo (Cupet), account for 60 percent of the output, plus 2 million cubic meters of natural gas per day.

Castro announced in late 2004 the discovery by Sherritt and Pebercan of a new deposit in the area at 18 API, with an estimated 100 million barrels of oil, and plans to look at two similar nearby deposits.

China's giant oil and gas company Sinopec Corp. signed an agreement earlier this year to jointly produce heavy oil with Cupet in westernmost Pinar del Rio province, with drilling expected to begin in 2006.

Cupet has struck a deal with Spanish major Repsol YPF, Norway's Norsk Hydro and ONGC Videsh Ltd., the overseas arm of India's state-owned Oil and Natural Gas Corp., to drill in the mile-deep (1.6-km) waters of the Gulf of Mexico further off the northwest coast, most likely in 2008.

Repsol found good-quality light oil in Cuba's economic exclusion zone of the Gulf of Mexico in 2004, but not in commercially viable quantities.

Sherritt has signed exploration contracts for four blocks, but is waiting to see what Repsol discovers in its six blocks.

REUTERS MP PM2118