Amid the turbulences over the full enforcement of the Helms-Burton Act triggered by the US Government, Cuba is going ahead with its first Licensing Round for Offshore Blocks in the Cuban Economic Exclusive Zone of Gulf of Mexico as planned and adjusted to schedule. Up to now, many companies have showed interest, aware that offshore investments are by nature out of reach of any potential lawsuits under the Title III of the Helms-Burton Act: no expropriated person or heir can reasonably claim property rights on hydrocarbon reserves in the Economic Exclusive Zone at the time of the Cuban Revolution.
The call for tenders offers 24 blocks associated with high exploratory potential, to be awarded to private companies in association with Unión Cuba Petróleo (CUPET), under Production Sharing Agreements (PSA) with very attractive terms:
- 30 to 35-year duration
- Progressive fiscal system
- Up to 70% cost oil recovery
- No Signature Bonus
- No Royalties
- No taxes or levies of any kind during exploration phase
- Income tax on profit oil 15%, at the 9th year of the project
- No taxes for repatriation of profits
- Terms and Conditions under the Foreign Investment Law 118, which provides a favorable regime and guarantees to foreign investors.
The official announcement was made in London on June 3rd 2019, at a roadshow that will have two more stops before culminating at Havana on 27th November as part of the Cuba Energy, Oil and Gas Conference 2019. The bidding process will run until 29th May 2020, the bid submission date, and license awards are planned for July 1st 2020.
Companies attending the roadshow can review the exploration opportunities, the contractual and fiscal terms and the legal framework. Also, they have the occasion to meet privately with CUPET to discuss any particular issue.
Before submitting a bid, interested companies must qualify with the National Office of Mineral Resources (ONRM), the regulation authority. Qualified companies will have access to a technical data package containing the 26,880 km of high-definition 2D multiclient seismic lines acquired by BGP in 2017 and all existing information on past operations in the area.
At present, Cuba produces around 60,000 boed from Late Jurassic reservoirs within 5.6 km off the Northern shore of the island. In 2012 three deep-water exploration wells were drilled further offshore. Although they made no commercial discovery, they had oil shows that might prove the extension of the currently producing unit in the offshore.
Author: Marina Paradela