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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."
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