By Wilfredo Cancio Isla | The Miami Herald
The $392.8 million owed by the Cuban government to Sherritt International could jeopardize petroleum drilling operations conducted by the Canadian company in Cuba, as soon as next year.
According to the company’s third trimester report (July-September) for 2008, pending accounts with the Cuban government represent an ‘‘exposed credit risk’’ and compromise agreed plans for expanding operations in 2009.
Though the report acknowledges that the Cuban government has expressed intentions to meet its financial obligations to the company ‘‘despite the negative impact of two hurricanes and the deplorable conditions of the global economy,’’ Sherritt executives warned that they will take a closer look at future drilling projects with Cuba.
According to the report, made public on Wednesday, the company expects to establish a framework for payment and will restructure investments before initiating drilling operations scheduled for 2009 in Cuba.
The Toronto-based company also indicated that it would hold off on plans to build a refinery in Canada that was conceived as a partnership with the Cuban government.
In July, Sherritt announced it would abandon plans to drill in the deep waters of Cuba’s so-called Economic Exclusion Zone in the Gulf of Mexico, restructuring petroleum operations toward land-based operations. Sherritt operates two rigs on land in conjunction with Canadian oil-company Pebercan and has acquired an additional area in the southern region of Havana province.
According to the bilateral agreement, petroleum extracted by Sherritt is purchased by the state oil company Cuba Petroleo (CUPET), though on occasions it has served to compensate payments by the Cuban government due to Sherritt’s share of nickel and cobalt mining operations on the island.
The company report notes, however, that recent drops in the price of nickel and cobalt have negatively impacted the amount of available Cuban funds, preventing Sherritt from negotiating debt under previous market prices.
The dilemma faced by Sherritt (a pioneer of foreign investments in the island) is now shared by Pebercan, as the Cuban government has failed to make payments to that company since April. By the end of this year, CUPET will owe $118.9 million to Pebercan, having only paid $2 million thus far, according to a recent report by the Montreal-based oil company.
The company reports coincide with the announcement of agreements between the Cuban government and Brazil’s state-run oil company Petrobras, a main topic during Brazilian President Luiz Inácio Lula da Silva’s recent visit to Cuba.
Earlier this month, CUPET stated that deep water petroleum reserves could reach 20 billion barrels. But analysts warn that the Sherritt report spells bad news for investors.
“Just as Cuba is trying to attract foreign investment for drilling, the revelations of nonpayment to one of its main petroleum partners doesn’t sound encouraging,’’ said former petroleum executive Jorge R. Piñón, currently a researcher with the University of Miami.
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