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Posted July 25, 2004 by publisher in Business In Cuba

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By Patrick Lescot | AFP | Petroleumworld

Weary from economic hardship, Cubans are eagerly awaiting news of the outcome of oil exploration off Cuba by Spain’s Repsol YPF that could turn cash-strapped Havana into an oil producer overnight and breathe life into President Fidel Castro’s communist regime.

Energy is the Achilles heel of the Cuban government which relies heavily on oil imports from Venezuela to run its oil-fuelled power plants. Economic growth, particularly in the key hard currency-generating tourism sector, is all but impossible without adequate energy resources.

With details kept under tight wraps here, drilling began in early June at a depth of 1,650 meters (5,413 feet) some 30 kilometers (18.6 miles) off the north coast of the Americas’ only one-party communist country with a population over 11 million hard-hit by shortages and drought.

Led by Castro since 1959, Cuba has been in dire economic straits since the collapse of the former Soviet bloc which once flooded it with subsidized food and fuel.

State media have not offered any dates for news on results, and many average Cubans here are speculating that news could come in a matter of days or by mid-August at the latest.

“They already know (the results). But Repsol will leave the announcement to Fidel Castro,” said a Spanish source, speaking privately.

Castro on July 26 is due to make an address, on the anniversary of the 1953 storming of the Moncada barracks ahead of the revolution; the customary holiday speech is one he has used in the past to make major announcements.

Repsol by all appearances has been optimistic if not betting big on the exploration, renting the Norwegian platform Eirik Raude to the tune of 195,000 dollars a day. Billed as “the most modern semi-submersible built to date,” the mega-rig is specially designed to tackle the challenges of extra-deep-sea drilling, at more than 3,000 meters (9,842 feet).

In a country now well accustomed to economic hard times, Cubans and foreigners here have begun to speculate on how striking black gold could change the entire economic, social and political equation in Cuba. The oil eyed by experts would be light and high-quality, unlike the Cuban crude pumped to date which is heavy and heavily sulfuric.

The possibility of striking major oil reserves off Cuba even has prodded US oil lobbies close to US President George W. Bush’s administration into action. John Gibson, president of the top US oil distributor Halliburton, came out against the US economic embargo on Havana which keeps US oil companies locked out of the potential for profit so close to home, The New York Times reported recently.

The United States, which has had an economic embargo on Cuba since 1962, recently moved to tighten some of its sanctions though it now sells food to Cuba for cash. Havana’s relations with the European Union have been severely strained by the government’s jailing of dissidents.

The most optimistic forecasts among those close to Repsol have suggested a possible find of reserves that could produce 400,000 barrels a day, almost six times the current 73,000 b/d output, for current demand of 169,000 b/d.

That would leave Cuba in a position to export more than 200,000 b/d, suddenly and dramatically ending the communist regime’s budget crunch, and potentially give it access to international credit it now lacks.

Building suspense here is made even greater by the fact that the supply of Venezuelan oil—one third of what Cuba consumes—soon and just as suddenly could be cut off.

That, if Venezuelan President Hugo Chavez, Castro’s only close ally in the region, loses a referendum August 15 on cutting short his term in office. If Venezuela’s opposition comes out on top, the flow of oil to Cuba would stop and Cuba would be plunged into another economic black hole.

Chavez recently quipped that Cuba soon could join OPEC. And some observers stress that if the news is bad, Cuba could just as easily revert entirely to mule power.

  1. Follow up post #1 added on July 26, 2004 by publisher with 3905 total posts

    Oil in Cuba?

    I hope that does not warrant a reason for President Bush to launch a “pre-emptive war” against Cuba.

    President Bush’ reasoning?

    Castro would have the possiblity of raising money through oil sales who could then develop means to possibly consider constructing research facilities to explore the manufacture of weapons of mass destruction to attack the United States.

    Sound like a good reason to launch a pre-emptive war against Cuba?



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