Cuba deal boosts China’s Latin American oil plans

HAVANA (Reuters) – China is taking another great leap forward in its Latin American energy plans, raising Cuba’s energy importance in the process, with a deal to lead a $6 billion refinery expansion project on the communist island, experts said this week.

The project, to be funded mostly by China’s Eximbank, is the latest of several significant moves in the region for the Asian power as it continues to expand its global influence.

For Cuba, the refurbishing of its antiquated refinery in the coastal city of Cienfuegos will provide an outlet for oil it hopes to tap soon in the Gulf of Mexico, while also laying the groundwork for the island to possibly become a key oil transshipment point for the Caribbean basin.

A unit of state-owned China National Petroleum Corp expects to begin work in early 2011 on the project that will more than double the refinery’s capacity to 150,000 barrels daily and include construction of a liquefied natural gas terminal.

Venezuela, Cuba’s closest ally, will provide financial guarantees in the form of oil, a pattern followed by Beijing in other deals for energy in Latin America.

In the past two years, China has financed projects and formed joint ventures in Venezuela, Brazil and Ecuador which are expected to bring it at least 500,000 barrels of crude oil per day.

It has leased a 5 million barrel storage facility on the Caribbean island of St. Eustatius and reportedly talked with San Antonio, Texas-based refining giant Valero Energy Corp. about buying its refinery on the island of Aruba.

The oil marriage of China with Latin America is one made in energy heaven, said analyst RoseAnne Franco at energy and mining consulting firm Wood Mackenzie in Houston.

“The regions are clearly of complementary interest. China is looking for energy security while Latin America is eager for new consumer capital markets,” she said. “There is a good foundation there for the relationship.”


The Cienfuegos project is part of larger modernization of Cuba’s energy infrastructure. Brazil is financing the refurbishing and expansion of the port at Mariel, which will be the logistical platform for offshore oil operations in the Gulf of Mexico set to begin next year.

Venezuela, Cuba’s principal ally and top trading partner, is refurbishing a tanker port at Matanzas and rehabilitating a cross-country pipeline to the Cienfuegos refinery. It has also committed to constructing a 150,000 barrel per day refinery at Matanzas, which is about 60 miles east of Havana.

The expectation that Cuba will find significant offshore oil reserves is driving much of the work.

Several companies are planning to sink exploratory wells off Cuba’s northern coast starting next year.

The U.S. Geological Survey has estimated Cuba has about 5 billion barrels of oil and 10 trillion cubic feet of natural gas offshore, but Cuba says it could have at least 20 billion barrels of oil.

The other, larger piece of the puzzle is the expansion of the Panama Canal, which is supposed to be finished by 2014 and will allow bigger oil tankers to use the waterway linking the Pacific and Atlantic oceans.

Cuba is well positioned to serve as both a refining center and oil transshipment point for the newly expanded canal, said Jonathan Benjamin-Alvarado, a Cuban oil expert at the University of Nebraska in Omaha.

“Cuba doesn’t solve anybody’s energy issues, but it expands the opportunities of the global markets to have Cuba as another point of transshipment or hub for oil services and activities,” he said.

“There is a need for expansion and diversification of both refining and storage capacity in the region, and Cuba fits perfectly,” he said.

Should normal relations with the United States ever be restored, Cuba, just 90 miles from Florida, would be well positioned to serve the U.S. market, said Jorge Pinon, an oil expert at Florida International University in Miami.


The Times Channels the Oil Lobby on Cuba

The top story in The New York Times yesterday carried a bit of water for the oil and gas lobby.

It’s about how Cuba is thinking about opening up its waters for oil drilling and how that could affect the U.S. if there were a spill. That’s a legit story, although it’s an old one. The Wall Street Journal wrote it three months ago and even then thought it worthy of just A5.

The Journal back then reported that “U.S. companies won’t participate because of a longstanding trade embargo against Cuba.” But Big Oil smells Havana crude. And that’s the twist on the Times’ story.

The paper somewhat credulously channels oil interests in reporting why U.S. drillers are worried about Cuban drilling:

The prospect of an accident is emboldening American drilling companies, backed by some critics of the embargo, to seek permission from the United States government to participate in Cuba’s nascent industry, even if only to protect against an accident.

“This isn’t about ideology. It’s about oil spills,” said Lee Hunt, president of the International Association of Drilling Contractors, a trade group that is trying to broaden bilateral contacts to promote drilling safety. “Political attitudes have to change in order to protect the gulf.”


Fortunately, we do get this acknowledgment:

Any opening could provide a convenient wedge for big American oil companies that have quietly lobbied Congress for years to allow them to bid for oil and natural gas deposits in waters off Cuba. Representatives of Exxon Mobil and Valero Energy attended an energy conference on Cuba in Mexico City in 2006, where they met Cuban oil officials.

Basically its unclear why global oil corporations already going into Cuba won’t have equipment as good as the Americans say they need. The spill angle is a bit of a red herring.

A better angle for this story might have been something like: American oil and gas companies, which currently can’t start any new wells in the Gulf, are trying to scare people into letting them start new wells in the Gulf—for Cuba.

The folly of the whole Cold War-relic embargo itself is another story.

Canadian mining company plans third Cuba plant

HAVANA, Cuba (Reuters) – Canadian mining and energy company Sherritt International will build a third gas-fired power plant in Cuba in conjunction with its state partners, local media reported this week.

Cienfuegos Communist Party weekly, 5th of September, said the new Energas plant, with a 150-megawatt capacity, would be built in the province, some 250 miles (402 km) southeast of Havana, fueled by gas from the Cienfuegos oil refinery, a joint venture with Venezuela’s state oil firm PDVSA.

“The effort is part of Cuba’s strategy to reduce imports and use environmentally friendly energy sources,” 5th of September said.

“The plants opening in the medium term will also mean gas generated power represents between 10 percent and 15 percent of all power generation in the country,” the weekly said.

Energas S.A., in which Sherritt has a 33 percent stake, currently operates two plants in western Matanzas and Havana provinces with a capacity of 376 megawatts, fired by natural gas from oil wells along the northwest coast.

Energas’s state partners are CubaPetroleo (Cupet) and Union Electrica, each with a 33 percent stake.

Sherritt is one of the largest foreign investor in Cuba, with additional interests in the nickel, oil and gas. – Cuba travel agency online

Petrobras opens Cuba office for oil search

HAVANA, July 17 (UPI) — In a move to prepare for possible oil drilling in Cuba, Brazil’s state-controlled energy giant Petrobras opened an office in Cuba, the company announced Thursday.

As part of its exploratory stage, Petrobras is currently analyzing results of seismic surveys carried out within the block it acquired last October in the communist-ruled country’s waters of the Gulf of Mexico.

According to the terms of its contract with Cupet, Cuba’s state-owned oil company, Petrobras has until May 2010 to decide whether to begin drilling.

Joao Figueras, CEO of Petrobras’ Venezuelan arm, said the Havana office is “a point of reference” during the first exploratory phase, the Latin American Herald Tribune reported. Then, if Petrobras decides to advance to the drilling stage, it will further expand its representation in Cuba, he said.

Petrobras attempted to search for oil in the country’s territorial waters between 1998 and 2001. “It was a perfect operation, but unfortunately the well was dry,” acknowledged Figueras, who also heads up the company’s new Cuba office.

Currently Petrobras has a 32-year exploration and production agreement with the Cuban government, allowing it to operate in a 617-square-mile block “very well located from a geological point of view,” Figueras said.

“If we make the decision to drill, the company will have the means to carry out the drilling,” he pointed out. “That’s why our job now is to be very focused on the geophysical-geological work so that we make the best decision.”

Cuba produces the equivalent in oil and gas of 75,000 barrels per day, around 50 percent of its energy needs. It imports the rest from oil-rich Venezuela.

According to Cupet’s estimates last November, there are 20 billion barrels of offshore oil in the communist country’s waters in the Gulf of Mexico. That puts Cuba among the world’s Top 20 countries in terms of oil reserves. But the U.S. Geological Survey’s 2004 estimate is far lower, ranging from 5 billion to 10 billion barrels.

Petrobras is not the only oil explorer operating in Cuba’s territory of the Gulf of Mexico known as the Exclusive Economic Zone, which covers more than 43,000 square miles. Cuba has also awarded oil and gas exploration leases to companies from Canada, Spain, Norway, China, India and Venezuela.

Petrobras, an integrated energy company and a global leader in deepwater oil exploration and production, operates in 27 countries in the Americas, Africa, Asia and Europe.

It produces more than 80 percent of Brazil’s oil from offshore fields. – Luxury rent Havana vacation rental

Azerbaijan to drill for oil in Cuba

Ria Novosti:

Azerbaijan plans to participate in developing oil fields in Cuba in line with a draft cooperation agreement, Azerbaijani Minister of Culture and Tourism Abulfaz Garayev said on Tuesday.

The agreement was approved at a meeting of the Azerbaijani-Cuban intergovernmental commission in Baku on Tuesday and is expected to be signed in the “near future,” the minister said.

“This is certainly a very interesting direction. And we hope that the work which is due to be completed over the next year will become a reality,” Garayev told journalists after the meeting.

Last year, Cuba produced around 4 million tons of oil, while Azerbaijan’s oil production reached 45 million tons.

At the meeting the sides also discussed cooperation in medicine, food production, culture and tourism. The first meeting of the commission was held in Havana in November 2007. – Tailor made packages to Cuba

Cuba Can Increase Oil Production

(Prensa Latina) Cuba might increase its production of oil and gas at the Economic Exclusive Zone of the Gulf of Mexico, said Cuban engineer Manuel Marrero Faz, said one of the local main experts on the topic Tuesday.

Engineer Marrero Faz intervened at the first working session of the 3rd Cuban Earth Science Convention in this capital, and explained how in the 2009-2012 period, a number of eight oil wells might be drilled in deep waters of the Gulf of Mexico, as a minimum.

Marrero Faz, a member of the Cuban Geology Association, said that with the support of the Cuban government has allowed reaching relevant results on productivity and technological applications.

He added that foreign investment has given good results with the introduction of new technologies in oil exploration and the total reduction of environmental contamination.

“At this moment, the emergent oil industry is already an important element of the Cuban economy,” Marrero Faz concluded. – casa particular in Cuba