ENERGY-CUBA: The Dream of Self-Sufficiency

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Jan 4 2001 (IPS) - Achieving self-sufficiency in energy production is starting to look like a possibility in Cuba, after a year of good news on the foreign investment front, and painfully high prices paid for oil imports.

Last year’s output of 3.3 million tonnes of oil and natural gas covered 51 percent of local power consumption, 10 percent up from 1999. This year, the government’s target is to produce four million tonnes.

Imports of crude needed to satisfy the rest of Cuba’s consumption needs – which total around nine million tonnes – cost the island over 500 million dollars last year.

A cooperation agreement signed with Venezuela in October will meet around one-third of the island’s energy needs, with supplies of 53,000 barrels (or 6,900 tonnes) a day of oil.

But the most promising news has come on the foreign investment front, in the form of three joint ventures, five mixed companies and 23 contracts involving venture capital for the production of hydrocarbons.

According to off the record sources, the real possibilities of local production by Brazil’s state-run oil company Petrobras, which signed a prospecting agreement with the Unión del Petróleo de Cuba (Cupet) in 1998, will soon become clear.

Through its Brasoil-Cuba subsidiary, Petrobras began to drill an exploratory well in Cayo Felipe, a key located to the north of the province of Ciego de Avila, 461 kms southeast of Havana.

Experts with Brasoil-Cuba estimate that the key could provide four to 6.5 million tonnes a year of light crude, with 25 API degrees in gravity – very different from the heavy, sulfurous crude normally found in Cuba – according to seismic studies.

But the directors of the company have attempted to downplay the enthusiastic projections by experts, which reached the press, cautioning that the chances that oil would be found in the area stood at just 12 percent.

The initial 20 million dollar investment pledged by Brasoil- Cuba in Cayo Felipe would be amply written off if oil were found.

In mid-December, the Spanish-Argentine oil company Repsol-YPF decided to join oil companies from Canada, Europe and Latin America that began prospecting for oil in Cuba in the 1990s.

An agreement signed with Cupet at that time outlines cooperation in exploration, production, refining, transport, storage and marketing of oil products in Cuba, Repsol-YPF reported in Spain.

The agreement also includes a contract for participation in exploration and production of hydrocarbons in the deep waters off the northwest tip of the island, in the Gulf of Mexico, shared by Cuba, the United States and Mexico.

The agreement puts Repsol-YPF among the first oil companies to respond to the call for bids launched by the Cuban government last year for prospecting for crude in the 112,000-sq-km area, which is divided into 59 blocs, in Cuba’s exclusive economic zone along the coast in the Gulf of Mexico.

Repsol-YPF is also interested in finding a way to complete and modernise a refinery in Cienfuegos, 336 kms southeast of Havana – one of the works that came to a standstill when the Soviet Union broke apart in 1991.

Russia and Venezuela might also participate in that project, by contributing technology, Venezuelan Foreign Minister José Vicente Rangel said in October in Havana.

The Cienfuegos refinery has a processing capacity of 180,000 barrels of oil a day. But Cuban authorities have had no luck so far in finding partners who can provide the capital, technology and market needed to finish the project.

Given the sunny outlook for oil production and the results achieved in exploiting natural gas in the generation of electricity, the government lost interest in the Juraguá nuclear plant located in Cienfuegos, which was also left incomplete with the disappearance of the Soviet Union.

The nuclear plant, the construction of which heightened tension with the United States, which complained that it posed a danger, located so close to U.S. territory, was designed to cut oil imports – which up to the late 1980s ran to around 13 million tonnes a year – by 15 percent.

Cuban President Fidel Castro said the lack of interest had nothing to do with U.S. concerns, but was based on an economic rationale that advised against investing in the completion of an isolated nuclear reactor.

The cost of atomic energy is three times higher than the cost of the power generated from the gas that previously escaped into the atmosphere in the process of drilling for oil, said Castro at the inauguration of a power plant run on gas in the province of Matanzas, some 100 kms southeast of Havana.

Cuba’s oil industry began to open up to foreign capital in the early 1990s. An estimated 600 million dollars have been invested in the industry in the past 10 years, mainly along the island’s northern seaboard.

Of 45 blocs made available to bidders, 20 have already been negotiated with companies from France, Britain, Canada, Brazil, Spain and Sweden.