[Marxism] Wny Cuba's dreams of major oil discoveries might come true
ffeldman at bellatlantic.net
Wed Apr 8 07:08:30 MDT 2009
I think the growing likelihood that Cuba will become significant or even
major oil producer has something to do with the signs that support in US
ruling circles for the blockade is now disintegrating rapidly.
Of course, the fact that Cuba becomes a significant oil producer will not
put an end to attempts to reverse the revolution in other ways -- just the
opposite actually. If you look at the world today, Washington's relations
with oil producers in the so-called "third world" are anything but smooth
But the blockade, which has clearly failed especially since the transition
in leadership which was expected to be a huge crisis, may have to go so that
Washington can get into the great game.
Why Cuba's Dreams of Major Oil Discoveries Might Come True
Recent estimates suggest that the island could move into the petroleum big
By Thomas Omestad
Posted March 3, 2009
HAVANAThere is a place tantalizingly close to American shores thatbut for
reasons of politics and foreign policycould emerge as a welcome new source
of oil for U.S. consumers. That surprising potential entrant onto the world
energy stage is Cuba. The island nation, says Jorge Piñon, a leading expert
on Cuba's energy at the University of Miami, "can certainly become a major
producer of oil."
Cuba is one of the biggest wild cards in the Western Hemisphere's energy
outlook. It is also the most politically sensitive. The nearly
half-century-old U.S. embargo against the Communist country means that
American energy companies and consumers cannot partake in Cuba's oil
business. Even foreign firms using drilling technology of U.S. origin could
face legal action. The Bush administration went so far as to disrupt a
conference of Cuban and U.S. oil executives underway at a Mexico City hotel
because the hotel was part of the U.S.-based Starwood chain. But given
Cuba's proximityand the relatively low cost of transporting its oil were
the embargo removedU.S. oil executives still pay attention.
A major oil find in Cuban waters could subvert the old logic behind the U.S.
embargo of Cuba, a policy that endures in part because it imposes only minor
economic costs while meeting the political demands of hard-line
Cuban-Americans. "It would obliterate the domestic political excuse," says
Julia Sweig, a Cuba expert at the Council on Foreign Relations in
Washington. Adds Jonathan Benjamin-Alvarado, a Cuba energy watcher at the
University of NebraskaOmaha, "It could be a game changer." In the Obama
administration, Cuba's oil development is likely to be seen as an issue for
the future. Says a senior State Department official, "If it's a game
changer, it's not going to be a game changer for a while."
Other players. Other countries are not barred from investigating
Cuban-controlled portions of the Gulf of Mexico, and they are doing just
that. The future drilling byforeign oil companies as close as 45 miles from
the shores of Florida injects new dimensions into the debate in the United
States over the embargo. Some decry the lost opportunities of a policy that
still aims to isolate Cuba while other countries do the opposite. Others
worry about ecological risks of any oil spills, which ocean currents would
tend to carry toward the Florida Keys and the state's east coast beaches.
Cuba now supplies about half of its own energy needs, say its officials,
principally from an oil belt running along its northern coast. Operations
include both traditional onshore wells and directional drilling rigs
positioned close to the sea that tap oil under the shallow, coastal waters
nearby. Many of the rigs are visible along the coastal highway between
Havana and the beach resort of Varadero, itself a major oil-producing zone
The oil is what specialists call heavy and sour, less suitable and more
expensive to refine into gasoline because of its thickness and high sulfur
content. All of Cuba's heavy crude goes into its oil-burning electricity
The oil action that pulls in global interest lies farther off the coast,
beneath the deep waters of the Gulf. How much lighter, lower-sulfur crude is
out there remains unclear. The U.S. Geological Survey estimates that Cuba's
offshore fields contain about 5 billion barrels of oilcomparable to
Colombia or Ecuadoras well as 10 trillion cubic feet of natural gas. Last
October, however, Cuba's state oil company unveiled a dramatically higher
estimate: more than 20 billion barrels of recoverable crudea level that, if
proved correct, compares to that of the United States. Cuba, with just 11.2
million people, would enter the top 15 oil-reserve nationscourtesy of
subsea oil geology like that off the Mexican and U.S. Gulf coasts. "Cuba has
high potential from an exploratory point of view," says Rafael Tenreyro
Pérez, exploration manager for the state oil company Cubapetroleo, or Cupet.
Experts say it would take three to five years to launch commercial oil
extraction following a large discovery. Exploratory drilling is due to
resume in the second quarter of this year 20 miles north of Havana by a
consortium led by Spain's Repsol, along with India's Oil & Natural Gas Co.
and Norway's StatoilHydro. Repsol struck oil in 2004, though not in
commercial quantities. Other foreign firms will very likely do exploratory
drilling in Cuban waters in 2010 and 2011, following on their seismic tests
in recent years. Tenreyro calls the seismic testing "very encouraging."
The lure of offshore oil has drawn not only the Spanish, Indians, and
Norwegians but also firms from Malaysia, Vietnam, Venezuela, and Brazil.
Says a senior diplomat from one country partnered with Havana, "The Cubans
are very hopeful, and so are we." Tenreyro says those companies have
contracted for 21 of the 59 offshore Cuban blocks, with 23 more under
discussion, including with Russian and Chinese firms. Venezuela's state oil
company has guided the renovation of one of Cuba's aging refineries and has
agreed to expand the capacity of that facility and one more, as well as
build a new refinery at the port of Mantanzas. As Cuba's key ally, Venezuela
has also thrown it an energy lifeline, shipping about 90,000 barrels per day
under easy terms that amounted to a roughly $3 billion subsidy last year.
Russian firms have pledged to help Cupet find, extract, and refine oil.
[Russian officials expect also to participate in the construction of sea
terminals and in training Cubans in oil work.] And Petrobras, the Brazilian
state oil giant known for skillful deep-water drilling, also is investing in
Cuba. At an oil deal signing ceremony here last year, Cuban President Raúl
Castro wondered aloud whether Petrobras would hit oil. "Don't worry, Raúl,"
replied Brazil's President Luiz Inácio Lula da Silva. "We're going to find
it here, and we're going to transform it into energy."
Cuba's dealings with outside oil firms have not been all rosy, though.
Canada's Sherritt International last year relinquished its offshore oil
blocks to the Cuban government before it started drilling. A cash-strapped
Cuba fell behind on payments to both Sherritt and another Canadian firm,
Pebercan, by a total of more than $500 million. In January, Cuba told
Pebercan it was terminating their agreement prematurely. And observers are
waiting to see how much the global oil price drop hinders plans for
expensive, deep-water drilling in Cuban waters.
Though Americans may not join in, the prospecting on the Cuban side of the
Gulf of Mexico has already become controversial. Last year, for instance, it
drew the attention of advocates for drilling on the U.S. continental shelf,
including then Vice President Dick Cheney. He wrongly claimed that China was
drilling for oil right now 60 miles off the coast of Florida. (Cheney's
office later conceded the error.) And Florida Democratic Sen. Bill Nelson
seized on the issue last year, urging that a 32-year-old boundary accord
evenly dividing the sea between the Florida Keys and Cuba be scrapped.
Nelson charged that a Cuban oil spill could "desecrate part of Florida's
unique environment and devastate its $50 billion tourism-driven economy."
Cuban officials vow that offshore drilling will meet "the highest standards
available" for environmental protection.
In Cuba, meanwhile, expectations run high that oil finds will help lift the
struggling state-run economy. "It will give Cuba the capabilities of
developing its economy very quickly,"predicts Josefina Vidal Ferreiro, a
senior Foreign Ministry official. "It will give us a lot of independence."
The other implication is that hard-currency flows from oil exports will
strengthen the ruling Communist Party to withstand whatever pressures remain
Cuba's needs. Cuba's leaders have been acutely concerned about energy
dependence on others. The collapse of the Soviet Union, once the island's
patron and energy donor, crippled Cuba's economy and spawned an energy
crisis in the early 1990s. Use of personal cars and farm tractors was
curtailed; thousands of Chinese bicycles were imported for people to get
around. Power outages persisted for years and made the sweltering Havana
summers feel all the more unbearable, locals recall ruefully. Energy
independence is a Cuban foreign policy goal. Daniel Erikson, an analyst at
the Inter-American Dialogue in Washington and author of The Cuba Wars, says
Cuba's pursuit of offshore oil reflects wariness about its past energy
dependence on the Soviets and today's on Hugo Chávez's Venezuela. "They
realize that nothing lasts forever," he says.
It remains unclear, though, whether future oil wealth will hastenor
retardthe cautious moves toward economic reform under Raúl Castro. Oil
revenues could cushion a broader but painful shift away from state direction
of all major economic activity to a more open, market-oriented system. By
easing the hardships of life in Cuba, oil wealth could reduce pressures for
political change. It could even reinforce the status quo. "Resource revenues
would feed the political patronage machine," reasons Archibald Ritter, a
Cuba expert at Carleton University in Ottawa.
Oil development "will change the position of Cuba with respect to the United
States and the whole world," says Luís René Fernández, a University of
Havana foreign policy specialist. But, he cautions, "it can be a complex
problem to have easy money at the same time you're rebuilding the society."
Long accustomed to privation, that is a problem most Cubans would like to
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