ECONOMY-CUBA: Gov’t Asks Oil Companies to Come and Explore

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Aug 12 1999 (IPS) - The Cuban government hopes to convince foreign petroleum companies to participate in the joint exploration of its territorial waters in an effort to expand national oil production, which is expected to reach two million metric tonnes this year.

The government’s oil exploration proposal comes on the heels of an announcement made earlier this month that Cuba would not be included in the San Jose Pact. Through this regional agreement, Mexico and Venezuela supply petroleum to Central American and Caribbean countries on favourable trade terms.

The Pact also includes Barbados, Belize, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua, and Panama.

Venezuelan president Hugo Chavez had proposed Cuba as a new member in the Pact, which was renewed for another year. But Mexico opposed the proposal saying that “a modification of this kind must be studied in detail (because of its) commercial and financial implications.”

For companies interested in oil exploration and production, the island nation is promoting areas in “the ocean depths” of the Gulf of Mexico covering 112,000 square kilometres, according to reports in the government-run Cuban press.

This expanse is divided into 59 blocks, approximately 2,000 sq km each, and most are located in areas where depths reach 2,000 metres.

International maritime law established in the late 1970s gives nations rights over the 200 miles off their coasts, also known as an exclusive economic zone. Each country has sovereignty over its area’s fishing and mineral resources.

The maritime border between Cuba and the United States, as well as Mexico and other neighbouring countries, was defined in the early 1980s.

In its efforts to attract foreign oil companies to the island, the Cuban government emphasises that there is a high probability of discovering important oil fields because the gulf region is especially rich in petroleum.

It also cites the advantages of the Cuban oil industry’s location – near petroleum-producing countries like Mexico and Venezuela, and with a guaranteed market in Cuba, the Bahamas and other nations in the region.

Current technology permits drilling and production at depths of up to 2,000 m, but industry predictions say oil operations will be possible in waters as deep as 3,500 m in seven or eight years.

Nearly ten years ago, Cuba initiated an ambitious development plan for its petroleum industry, incorporating cutting-edge technology and ties to foreign capital, which has allowed the island nation to increase its oil production every year.

Last November, Brazil’s government-run Petrobras joined nearly a dozen other foreign companies to work with Cuba in oil exploration.

The joing projects with foreign capital are at the risk of the companies, which assume the total costs of oil exploration. If petroleum is found, Cuba will pay the companies with the petroleum itself.

Cuba’s territorial waters were divided into 45 blocks for oil exploration, 19 of which been claimed. Industry experts indicate that discovery rates there are within the range of global discovery ratios: one of every six areas explored.

According to official estimates, Cuba’s production this year will reach two million tonnes of crude and 500 million cubic metres of natural gas. These totals cover approximately 30 percent of Cuba’s internal demand. Last year’s oil production of 1.68 million tonnes was 16 percent higher than the 1997 total.

Though this volume is still not enough to meet Cuban consumption, officials see it as a significan amount, especially compared to the 526,800 tonnes produced in 1991.

Until the early 1990s, the island received 13 million tonnes of crude from Moscow annually. “The country lived on those 13 million tonnes. We were bathed in oil, no matter what happened,” joked the Cuban magazine ‘Bohemia.’

The collapse of the socialist bloc and the break-up of the Soviet Union left Cuba without its largest economic and trade partners – and without an oil supply.

Cuba had to find a way to live with half the fuel it had consumed in the 1980s, and ended up paying for oil imports with nearly 60 percent of its total export income.

The nation has been paying for part of its petroluem supply with sugar in an agreement with Russia, which inherited some of the former Soviet Union’s commitments.

According to a protocol signed earlier this year, Russia must supply the island with 1.5 million tonnes of oil in 1999. In exchange it will receive 800,000 tonnes of unrefined Cuban sugar.

Once the agreement expires, the Russian government will likely pass the responsibility of supplying Cuba with petroleum to private companies.