Sherritt, Pebercan discover oil near Santa Cruz del Norte.

Two Canadian energy conglomerates, Sherritt International Corp. and Pebercan Inc., have discovered a new oil field off Cuba's northern coast.

"We have a new oil discovery--the first since 1999," Fidel Castro said in a speech to Cuba's National Assembly in late December.

The Santa Cruz oil field, 53 kms east of Havana and 145 kms south of Key West, Fla., will go into production in 2006.

The Santa Cruz-100 oil well proved its high production capacity only five days after initial trials began. The oil found is 18[degrees] API (lighter than the Varadero or Yumuri crudes), with very little water content and good pressure, meaning it doesn't need pumping. Sulfur content is below 5%.

But while Castro was quick to brag that the area contains 100 million barrels of reserves, sources close to the situation told Canada's National Post that more drilling is needed to ascertain the size of the field.

"There's a vague idea of what the reserves are, but until other wells are drilled, the full size won't be known," an industry source told the Toronto newspaper.

In a press release, Montreal-based Pebercan said the oil field could measure up to 20 sq kms. Both Castro and Pebercan said the oil is of higher quality than the crude oil already being drilled in the area.

According to Petroleum News of Calgary, Pebercan was incorporated in 1987 and has confined its operations to Cuba, where it holds 1.5 million gross acres and produced 12,800 bpd from gross proven and probable reserves of 67 million barrels.

In his speech, Castro said Pebercan and Sherritt would drill two test wells and explore three other nearby potential deposits in 2005.

From Dec. 14 to Dec. 19, when it was closed to study its characteristics, the well produced about 1,000 tons. This well is to be kept in "experimental production" over the next few months to observe its performance and define the parameters of the oil field.

Meanwhile, in the first half of 2005, Sherritt and Pebercan plan to drill two evaluation wells east of the capital and one to the west of Santa Cruz-100. This procedure is essential in order to gain better understanding of the deposit found.

The two-year (2005-07) schedule set for the development stage includes the building of ground facilities to collect and transport the crude and associated natural gas. Development wells hended to exploit the oil field will also be built during that period.

Ground facilities will include a pipeline to take the crude to the central station of Boca de Jaruco where it is processed. The quality of the crude found and its low sulfur content will allow mixing with lighter crudes and less sulfur in a proportion close to 20%.

Information released at the session of the National Assembly where Castro spoke hints that new discoveries are not limited to Santa Cruz del Norte.

Sherritt and Pebercan are the largest foreign companies owning joint ventures with the Cuban government, accounting for 60% of Cuba's oil and gas output.

Other companies have tried to find oil in the area. Spanish oil company Repsol YPF reported the first test well drilled in the deep water was not commercially viable, but the company plans to drill again in 2006.

The 112,000-sq-km area was opened to foreign exploration in 1999. To date, Repsol and Sherritt have signed exploration contracts, taking six blocks and four blocks, respectively, off the northwest coast.

Brazilian state oil entity Petrobras is also looking at existing data from two deepwater blocks, while two Chinese companies are also studying various blocks.

In 2003, Cuba produced 26 million barrels of crude oil (around 71,300 bbl/day), enough to meet half its needs. Cuba imports the rest of its oil from Venezuela.

In 2004 it also produced 653 million cubic meters of gas.

Cuban crude comes from onshore wells that dot the northwest coast along Havana and Matanzas provinces. The poor-quality oil is burned in modified power plants and factories, and the gas is used to generate electricity and for cooking fuel.

Details: Cedric Sirven, Vice-President, Pebercan, 507 Place d'Armes, #1900, Montreal PQ H2Y 2W8. Tel: [phone]. Fax: [phone]. E-mail: [e-mail].