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March 11, 2015

Offshore Caribbean – a resource filled paradise?

Brimming with sun-drenched islands and a booming tourist trade, the Caribbean isn’t an obvious offshore oil and gas hub, yet many Caribbean countries have been trying to lure oil companies to prospect their shores for years – and finally some companies are taking notice. Is this tourist’s hotspot set to become a new offshore oil and gas hub?

By Heidi Vella


The crystal clear waters of the Caribbean could be the gateway to billions of barrels of oil and cubic metres of gas. The region holds an estimated 126 billion barrels (bb) of oil and 679 trillion cubic feet (tcf) of undiscovered natural gas in 31 geologic provinces, according to a 2012 report by the US Geological Survey.

With the exception of Trinidad and Tobago, most Caribbean countries, such as Jamaica, The Bahamas, Honduras and Costa Rica, have yet to prove the extent of their offshore hydrocarbon reserves, let alone produce them.

The frontier is however, finally seeing some movement with Tullow Oil, BG Group and others entering the region for seismic surveying and exploration. Is the Caribbean in the pipeline to become a new offshore frontier or will it remain an undeveloped prospect? We take a look at the potential, the progress and the hurdles facing each key Caribbean country keen to exploit its offshore reserves.

Trinidad & Tobago

The Columbus basin offshore Trinidad and Tobago is considered the least risky frontier in the Caribbean. The basin is said to have great source rock influenced by the Orinoco River which provides a lot of sediment and faulting.

In 2011, the country produced 135,000 barrels per day (bbl/d) of oil and natural gas production, which accounts for just over 85% of the country’s natural resource base. In 2010 the country produced 1.5tcf of natural gas, over three times the level seen in 2000.

BP Trinidad and Tobago (BPTT) has been the major player in Trinidad and Tobago since 1969. The company has 13 offshore installations with 904,000 offshore acres currently in operation and was awarded two deepwater blocks – block TTDAA 3 and Block TTDAA 7 – in 2012, in which BHP Billiton bought a 70% stake in last year. Deepwater deposits in the Columbus basin have, up until now, not been explored.

BHP is currently in the process of securing further 3D seismic data of the area. There has been some speculation ocean-bottom cable (OBC) 3D seismic data has led the companies to believe there is more gas in the area than previously anticipated.


Currently Jamaica has no production of its own despite trying hard to drum interest in its offshore acreage over the years.

Russia has pledged to plough money into developing Cuba’s offshore oil, despite many companies having tried and failed before.

Finally, last year, the government secured a production sharing agreement with Tullow Oil to explore the Walton Basin and Morant Basin areas covering 32,065km2. The area includes 10 full blocks and one part block in shallow water to the south of Jamaica.

Tullow Oil says that it "commits to carry out low cost studies, reprocessing work and, if the company elects to proceed, acquisition of new 2D and 3D seismic in the initial three and a half year exploration period."

Previously, there have been oil or gas shows in 10 of the 11 onshore and offshore wells drilled in Jamaica, according to the company, but to date none have been deemed commercially viable.

Speaking of Jamaica’s offshore potential Jim Flanagan, regional research manager of Caribbean energy technical at IHS, says: "Jamaica doesn’t have a history of production so whatever anybody does out there is quite risky."

"For a basin like Jamaica…it is important for the company to have a model contract that reflects that."

The Bahamas

The Bahamas, could hold up to 4.3 million barrels of oil according to the US Geological Survey 2012 report.

Although the country has been trying to get some drilling underway for some time – Flanagan says the country has conducted some seismic surveying and mapping which has shown some big structures – it has so far failed to drum up any interest.

One business that is interested, however, is independent company Bahamas Offshore Petroleum (BOP). BOP, and its 100% owned subsidiary Island Offshore, were awarded 10 blocks offshore Bahamas in 2007 for a 12 year period.

The contract signed with the government require BOP and IOP to commence drilling of the first exploration well by April 2015, with a further requirement to commence a second exploration well by April 2017, though at the current rate of progress it seems unlikely this target will be met.

"The Bahamas, could hold up to 4.3 million barrels of oil according to the US Geological Survey."

Flanagan says drilling has been held back by a law, currently being changed, that states the country must by law hold a referendum to see if citizens are happy for the production of oil and gas to go ahead after the company has engaged in appraisal and testing.

"That is not a very attractive proposition to a company who drills a well. That is an added risk so it wasn’t very satisfactory to oil companies," says Flanagan.

He says the government is now working new legislation through parliament that will allow, if it passes, domestic and international companies to drill offshore the Bahamas, seemly doing away with the question of the referendum. "Though it has not been expressly stated so," says Flanagan.

However, a statement on BOP’s website does confirm that as of 2013 the company has been assured a referendum will not be held after drilling.

The fall in oil price also puts into question the viability of drilling offshore the Bahamas – as in any un-producing Caribbean country, says Flanagan.

"We’ll just have to see if it goes forward or not," he says.


In 2013 BG Group was awarded an exploration licence covering 35,000km2 offshore Honduras. The group will conduct initial exploration and review existing data and conduct surveys over four years with an initial investment of $20m. After this the company is obliged to relinquish 50% of acreage to the Honduran Government.

Though the company is in the very early stages of exploration, opposition to offshore oil and gas development has already formed.

Afro-Indigenous Garifuna residents of the Cayos Cochinos off the coast of Honduras are said to be concerned about the prospect of oil production in their waters.

With dwindling oil and gas reserves growing more valuable every year, blurred boundaries are ripe for dispute.

According to reports the communities say they were not consulted about the agreement between BG Group and the government but presented with the contract six months after the fact. The residents are concerned any exploration and subsequent drilling could affect fishing and their traditional way of life.

However, BG Group insist they have "consulted with government ministries, civil society, and community groups to understand what people think of our plans" and are committed to resolving these "above surface issues".

BG Group is not the first to explore offshore Honduras. In the past a reported thirty-two wells have been drilled by companies such as Shell, Mobil, Texaco, and Chevron since 1920, but there has never been any significant production.

According to Reuters neither government officials nor BG group have estimates for oil and gas reserves in the block currently under exploration.


Aruba, an island in the Southern Caribbean about 29km north of the coast of Venezuela, signed a gas and petroleum exploration deal at the end of 2012 with Repsol, covering 14,000km2. The contract between Repsol and Aruban public oil company, Compania di Petroleo Arubano (CAP), includes an eight-year exploration period divided into four phases.

If the exploratory phase is successful, Repsol will start drilling for gas and/or oil by 2017 at the earliest.

BG Group entered Aruba shortly after Repsol in 2014, and holds an offshore exploration licence covering approximately 14 000km2. The company says a 3D seismic programme will be completed in 2014.

The Aruban government are keen to start oil and gas production in a bid to diversify the income of the small island which mostly relies on tourism.

Costa Rica

"It’s probably unlikely you will see any drilling done in Costa Rica because there is a strong environmental activist group there," says Flanagan.

Very few Costa Ricans are in favour of offshore oil and gas development in their pristine water – fisherman, locals and indigenous tribes are all opposed.

In fact last year, President Luis Guillermo Solís extended the country’s ban on petroleum exploration and extraction until 2021. This is an extension of a ban signed by former President Laura Chinchilla.

Costa Rica also has two ongoing border disputes with Nicaragua over a 5km2 island at the mouth of the San Juan border river. Whoever owns the island will also control 11,000km2 of Caribbean maritime territory which could be filled with hydrocarbons.

Follow Heidi Vella on Google+  

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