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Cuba: Havana's Black Gold

by Tom FawthropBBC
November 13th, 2003

HAVANA - 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 energy needs - is expected to eventually ease the country's current economic woes.

The Cuban economy has been crippled since the end of Soviet oil subsidies in 1990, which also spelled the of subsidised sugar exports to 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 is 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 up 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 are being drilled by Canada's Sherritt Mining from the 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.

UK firms

Nutec, a UK company based in Aberdeen, has signed a contract with the Cuban government to train 100 Cuban engineers in operational skills and safety in the management of offshore oil-rigs, in preparation for the day when the anticipated light crude oil starts to flow for the first time in the Cuban zone of the Gulf of Mexico.

The first batch of ten Cubans have started the training course in Aberdeen. The British Ambassador in Havana, Paul Hare, told the BBC that "this kind of UK-Cuba cooperation fits very well with our policy of constructive engagement," in contrast to Washington's policy of continuing to impose a 41-year old trade embargo.

Economic salvation

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 the 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 black-outs are on longer due to fuel shortages, but the result of inadequate maintenance and transmission lines plus increasing demand from the tourist sector and hotels.

Transport roadblock

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 higher grade oil, Cuba largely depends on imports 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 part cash, and part in training and medical services for the oil.

Several thousand doctors, and hundreds of teachers, engineers and sports trainers have been dispatched to assist Venezuela's development programmes in return for 53,000 thousand barrels of oil per day being shipped to Cuba over a five year period.

And oil experts from Venezuela have come to Cuba to help develop the domestic oil industry and to adapt its power stations.

Tourism industry

With the decline and restructuring of the sugar industry, Cuba is now dependent on its growing tourism industry for hard currency to keep the country afloat, plus the export of nickel and some other minerals.

The island economy is pinning its hopes on striking oil in the Gulf of Mexico to garner oil for export in order to invest more in the country's creaking infrastructure and fund the country's comprehensive free education and health system.

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