Cuba's new oil industry

Saturday, November 15, 2003

HAVANA, Cuba: Cuba's fast-improving energy sector - with domestic oil production now at 4.1m tons a year and accounting for 80% of the country's electricity needs - is expected to eventually ease the country's current economic woes. 

According to a recent report by the BBC, the Cuban economy has been crippled since the end of Soviet oil subsidies in 1990, which also spelled the end of mass sugar exports which were subsidised by the USSR. 

Since then, the economy has grown increasingly dependent on tourism in order to gain hard currency to pay for needed imports, forcing strict rationing. 

But with domestic oil and natural gas production growing at 10% a year, Cuba has begun to meet most of its energy needs without the need for imports. 

Now it is also opening its offshore oilfields to foreign development. 

Foreign oil companies are actively engaged in offshore exploration in the Gulf of Mexico, with six blocks awarded to Spain's Repsol and an adjacent four blocks being drilled by Canada's Sherritt Corporation in Cuba's exclusive zone of 112,000 sq. km. 

The Brazilian state-owned oil company Petrobras recently signed a new agreement to drill in 10 blocks in the Gulf. 

Geological experts consider there is a good chance that there are some oil reserves in the region, although previous drilling attempts by Petrobras in a different location two years ago proved abortive. 

The high density domestic crude oil that now provides 90% of Cuba's electricity needs has forced power stations to introduce costly conversions to cope with its high sulphur content. 

But the long-term savings in foreign exchange and the reduction in power cuts are expected to provide a considerable boost to the economy. 

The island's continuing blackouts are no longer due to fuel shortages, but the result of inadequate maintenance of transmission lines plus increasing demand from the tourist sector and hotels. 

The transportation sector also desperately needs increased fuel supplies in order to achieve full normalisation. 

The country has the technology to extract biomass from sugar-cane production and intends to utilise such new energy sources in the future. 

For the moment, Cuba largely depends for those needs on imports of light crude from Venezuela, which provides preferential rates to Caribbean countries under the San Jose Agreement. 

In addition, a wide-ranging bilateral agreement between the two countries has enabled Cuba to pay partly in cash, and partly in training and medical services for the oil. 

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