Interview with MEO Australia’s CEO, Peter Stickland
I sat down with Peter Stickland, Managing Director and Chief Executive Officer at MEO Australia (ASX: MEO) last week to talk about oil in Cuba and MEO’s oil exploration project in Block 9.
Four years ago, MEO was looking for new ventures with large resources in under explored onshore settings and with the potential for multiple returns. Cuba fit the requirements. Errol Johnsone, Chief Geo-scientist at MEO, formerly with ExxonMobil, says there are only a handful of places onshore in the world that show the kind of conventional oil potential Cuba has.
One of the most interesting things to come out of our conversation was the fact that Cuba could one day attain self-sufficiency and become a net exporter of oil.
MEO Australia in Cuba:
In 2012, MEO executives started looking at Cuba. A year later, MEO was working through the prequalification process with Petro Australis, a private company with expertise in Cuba. When the prequalification was completed, direct negotiations with CUPET began.
Negotiations concluded in September of 2015 when MEO signed a Production Sharing Contract (PSC) for what is known as Block 9. Block 9 is an onshore location about 2,300 square km or 1/2 million acres in size, to the east of Havana not far from Varadero. The signed PSC is for 25 years with CUPET with an exploration period of 8.5 years in four sub periods. MEO can start production earlier if a commercial discovery is made.
The first assessments by MEO of Block 9 have shown that one of the three identified petroleum plays on Block 9 contains potentially 8.183 billion barrels of Oil-in-Place with prospective recoverable volumes of 395 million barrels. Significant oil potential is also expected to be identified in the shallower plays. Overall Peter sums up as, “it looks good and better than we expected. To identify almost 400 million of potentially high quality light oil, recoverable in conventional onshore oil play is extraordinary.”
An independent American assessment of the entire Cuban oil province shows a potential of 4.6 billion barrels. Domestically, Cuba currently produces about 80,000 barrels of oil a day, but only about half of what is needed for domestic use. Although the oil in Cuba is chiefly heavy oil with a high sulfur content, MEO believes they may find a lighter, higher quality oil than what is produced at the moment.
Will these findings significantly impact Cuba’s energy sector?
“If the potential we are seeing so far is borne out by drilling results, then there is the potential for Cuba to become self-sufficient but that’s not going to happen overnight of course. There might be a five or ten year period but the potential is there and that’s from the resource assessment we’ve done so far, not the entire resource assessment as I think there’s still more to come in the Block that we have. 80,000 barrels a day is a lot of oil obviously but if we can find a couple of hundred million barrels or the 400 million barrels that’s suggested, an unrisked potential outlook, then 80,000 barrels per day of production is not impossible.”
Could we then assume that Cuba will become self-sufficient one day?
“It’s natural that Cuba has an ambition to be self-sufficient for energy. It’s a core ambition for most countries to be self-sufficient for energy.”
Cuba has affinities with the Gulf of Mexico petroleum system which has huge resources. “If you look at Louisiana, Texas onshore and offshore and Mexico onshore and offshore and you add all that, it’s of the order of 100 billion barrels. Cuba is part of that arc of the Gulf of Mexico but it’s been under explored for the last 50 years. The opportunity presents itself to look at it afresh and certainly for us it’s very exciting.
I’d like to think that Cuba has the potential to go beyond self-sufficiency and in an upside case, be able to become a net exporter of energy. That would be very exciting.”
How was the investment experience with the Cubans?
“There have been limitations with the American embargo. MEO is not allowed to import U.S. technology into Cuba and MEO respects that. Working around this limitation, Chinese and European companies have offered their expertise.”
On the investment experience with Cuba, Peter said that overall the Cubans were “reasonable to negotiate with and very professional in the way they negotiated the Block.”