Cuba launched its first offshore licensing in London this week, with representatives from companies including Eni, Premier Oil and China National Petroleum Corporation turning up to assess the opportunities.

The timeline for the round — which has been unveiled in the face of escalating US sanctions against Cuba — calls for production sharing contracts to be signed off by the Havana government in September 2020.

The acreage on offer is based on some 27,000 kilometres of 2D multi-client seismic data acquired in 2017 by China’s BGP, which is supporting state-owned Union Cuba Petroleum (Cupet) in the round.

The 24 most promising blocks have been demarcated in frontier Gulf of Mexico waters, north-west of the island.

This acreage covers six geological plays in water depths between 500 metres and 3000 metres, housing 45 leads with potential recoverable resources of about 6.5 billion barrels of oil, according to Cupet deputy general director Roberto Suarez Sotolongo.

The terms and conditions of PSCs are well defined but petroleum legislation is still being discussed by government because it must align with a new constitution that was approved in a February referendum and that aims, among other things, to protect foreign investment through stability clauses.

Sotolongo said: “There is a draft of the petroleum law at the National Assembly,” with other legislation related to tax, environment and regulations either finalised or being developed.

“There’s a process of cascading down all the impacts of the (approved) constitution because many of the laws that were in place before need to be updated and aligned with the wording of the constitution,” explained the Cupet executive.

Several commissions at the National Assembly are working on these issues, said Sotolongo.

While reluctant to say exactly when the petroleum legislation will be finalised, he suggested the process could take “one to two years.”

Juan Barrizonte Ballesteros, commercial upstream manager at Cupet, outlined the licensing schedule which began with this week’s London roadshow and will be followed by two more roadshows at yet-to-be disclosed locations plus a final event in Havana on 26 November.

Companies have until 10 January 2020 to register their interest, with clarifications set to take place until the end of that month.

This will be followed by a qualification exercise — through Havana’s National Office of Mineral Resources — lasting through to 29 May next year by which date bids must also be submitted.

Bids will be opened on 29 June with licenses set to be awarded on 1 July 2020 and contracts approved by the start of September.

The main selection criteria will be the work programme proposed and the speed with which it will be implemented.

Companies or consortia can apply for more than one block, explained Ballesteros, with the PSCs to run for eight years, with two-year extension options.

The PSCs are described by Cupet as “typical” with the contractor assuming all risks, costs and responsibilities.

No signature bonus, royalties, taxes or levies of any kind will apply in the exploration phase, with the PSC allowing up to 70% cost recovery.

Income tax on profit oil is 15% from the start of the exploitation phase with no taxes levied on the repatriation of profits.

Exploitation periods will last up to 35 years.

Other conditions include training costs of $200,000 per year and prioritising Cuban workers, goods and services if “competent and cost effective.”

Cuba currently produces about 60,000 barrels of oil equivalent per day from its western offshore area from extended reach wells drilled into fold and thrust belts.

According to a presentation by Cupet’s E&P manager Osvaldo Lopez Corzo, the 24 offered blocks — N9-N18, N21-22, N25-29, N31-32, N43-44 and N50 — lie in the ultra-deepwater Sigsbee basin, Yucatan Platform, Central basin, Foreland basin and the Florida-Bahamas Platform.

A number of blocks — N36, 37, 45 and 51 — also straddle the proven Thrust & Fold Belt which hosts almost all Cuba’s producing oilfields.

Shu Kutai, BGP’s chief geologist, identified the acreage as hosting potential Cretaceous and Jurassic source rocks with multiple potential reservoirs.

Despite Cuba's new constitution and the opportunities offered in this licensing round, some sources said US sanctions could have a big influence on the outcome.

One source close to Cuba's government suggested US President Donald Trump's administration is making things "difficult" while another source familiar with the round believes for it to be a success, it should have been delayed until after Trump leaves office.

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Cuba sets out offshore stall