October 23, 2006

Many hope to strike it rich with Cuba's oil

An offshore basin has non-U.S. companies excited.

By Gary Marx. The Philadelphia Inquirer, October 23, 2006.

HAVANA - Cuba has become the latest country drawn into the frenzied hunt for oil, hoping that a gusher in its Caribbean fields will ease its energy dependence and revive its economy.

After years of boasting about its energy potential but seeing few results, Cuban authorities received good news last year when the U.S. Geological Survey estimated Cuba's northern offshore basin contained 4.6 billion barrels of oil and 9.8 trillion cubic feet of natural gas.

The amount of oil is roughly half the estimated reserves in the Arctic National Wildlife Refuge, which President Bush wants to open for drilling, and could provide Cuba daily production of about 300,000 barrels.

"Cuba is not Saudi Arabia or Venezuela, but it could become a major oil and gas player in the region," said Jorge Pinon, former president of Amoco Oil in Latin America and now a senior research associate at the University of Miami.

Already, oil companies from Canada, Spain, Norway, Malaysia and India have signed agreements with Cuba's state-owned company, Cupet, to begin exploring in waters more than 6,000 feet deep.

This month, India's state-run petroleum company raised its stake in Cuba's oil sweepstakes by signing a deal to join Cupet in exploring 1,660 square miles off Cuba's northwestern coast.

R.S. Butola, a top Indian oil executive, said geological studies of the area were promising. The initial exploration is expected to last several years and cost tens of millions of dollars.

Bringing a deep-water oil well on line would take many more years and cost $1 billion or more.

Venezuela's state-run oil giant, Petroleos de Venezuela, and Brazilian and Chinese companies also are interested in exploring for high-quality crude in Cuba's 43,250-square-mile offshore zone.

American oil corporations are barred from participating because of U.S. trade sanctions against the island. The sanctions also would prohibit the United States from importing Cuban oil.

In February, executives from ExxonMobil Corp. and other U.S. corporations met with Cuban officials in Mexico City to discuss oil exploration in Cuba's gulf waters, which extend to 50 miles off Florida.

But the meeting was disrupted after an American-owned hotel expelled the Cuban officials under pressure from the Treasury Department, which argued that housing the Cubans violated the U.S. trade embargo.

Cuban and Mexican authorities reacted with anger and accused Washington of interfering in other countries' internal affairs.

One Cuban official who took part in the meeting was Manuel Marrero, senior petroleum adviser at Cuba's Ministry of Basic Industry. Only 16 of Cuba's 59 offshore oil blocks have been auctioned, leaving plenty of opportunity for U.S. companies, he said.

"We know U.S. companies are considering it," Marrero said. "The ball is in the U.S. court."

So far, American multinationals haven't thrown their weight behind the Cuba effort because the potential amount of oil, while impressive, is not yet worth the political battle and financial risk, experts say.

Instead, American executives are focused on getting legislation passed to open millions of acres to oil and gas drilling in U.S. waters.

Bush and influential Cuban American legislators oppose U.S. participation in oil exploration off Cuban because, they argue, it would strengthen the island's authoritarian government.

U.S. Rep. Jeff Flake (R., Ariz.), who introduced a bill in May that would allow U.S. companies to bid on oil-exploration leases in Cuban waters, said the political climate in Washington could change if Democrats scored big gains in congressional elections.

A strong opponent of the embargo, Flake said Democrats generally had been more supportive than Republicans of easing U.S. travel and trade restrictions to Cuba.

Energy has long been an Achilles' heel for Cuba.

After the 1959 Cuban Revolution, the Soviet Union provided discounted oil as part of a huge assistance program. The Soviet Union's collapse in 1991 ended the fuel shipments and sent the Cuban economy into a tailspin as bicycles replaced cars and blackouts plagued the nation.

To ease the crisis, Cuba opened the oil sector to foreign investment in 1999. Since then, Sherritt International Corp. and a second Canadian company have helped the island's oil production increase to about 70,000 barrels a day.

But that amount covers less than half of Cuba's consumption, and the poor-quality oil retrieved beneath shallow waters is expensive and difficult to refine, diplomats and analysts say.

Cuba gets about 98,000 barrels of high-quality discounted crude a day from Venezuela. Cuban authorities believe even a modest strike could ease the island's energy dependence and chronic economic woes.

"I am 100 percent convinced that in the next five or six years, Cuba will be developing its deep-water sector," Marrero said. "We can expect big results."


News from Cuba
by e-mail


Cooperativas Agrícolas
Movimiento Sindical
Artes Plásticas
El Niño del Pífano
Octavillas sobre La Habana
Fotos de Cuba
Quiénes Somos
Informe Anual
Correo Eléctronico


In Association with


145 Madeira Ave, Suite 207
Coral Gables, FL 33134
(305) 774-1887