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Cuba's Offshore Development May Influence Relations With US

Cuba’s anticipated development of its offshore oil resources would profoundly affect its national economy, but have more political impacts on relations with the US

Cuba's Offshore Development May Influence Relations With US

“What we’re seeing could be a potential game changer,” said Kirby Jones, president of the Alamar Associates consulting firm, who was a participant of expert forum on October,8. “For the first time in 50 years, Cuba would have something the US needs, something of strategic importance.”

The quantity of foreign oil companies already present in Cuba suggests that the country doesn’t necessarily need the US as it moves ahead, he suggested during a seminar cosponsored by Inter-American Dialogue and Florida International University’s Cuban Research Institute. “The question of whether we provide a lifeline to Cuba’s economy has become academic,” he said. “We’re starting a new ballgame here, and have had some spring training. But others are crowding into the lineup.”

Participants immediately dismissed rumors of the Chinese already drilling off Cuba. But they also indicated that China could eventually play an important role in parts of Cuba’s oil industry beyond exploration and production.
China could invest heavily and be the operator of two new refineries which have proposed to process the heavy crude from offshore wells, according to Jorge R. Pinon, a visiting research fellow at CRI’s Latin American and Caribbean Center. It’s uncertain whether the North Belt offshore region could make Cuba a net oil exporter, but it could break the country’s dependent relationship with Venezuela to both countries’ satisfaction, he said.
“The same relationship Cuba had with the Soviet Union in the 1960s and ‘70s it now has with Venezuela,” said Pinon. “I believe China could become its new partner. It’s looking for Caribbean refining capacity, including Valero’s facility in Aruba, and could use Cuba’s new refineries to sell light products to the US and keep the diesel and fuel oil for itself.”
Many Cuban government officials, however, also believe it would make more logistical sense to deal with US companies on the Gulf Coast than European, Middle Eastern, or Asian partners, Jones said. The main obstacle remains the US embargo against Cuba and onerous provisions which make it nearly impossible for US firms to do business there even if they can get exemptions from it, he continued. “If we continue to play the reciprocity game, Cuba will simply continue going somewhere else,” he said.
Spanish multinational oil company Repsol-YPF SA contacted last spring with Eni SPA subsidiary Saipem to build an offshore rig in China for use in Cuba. The Scarabeo 9 semisubmersible is headed for Singapore for electrical system work before it sets out for Cuba, where it’s expected to arrive during 2011’s first quarter, seminar participants said. Jonathan Benjamin-Alvarado, a political science professor at the University of Nebraska at Omaha, considers it an end-run around the US embargo.
He said that one immediate impact for individual Cubans would be steadier selections of retail goods and refined products. “We’re starting to see significant investment in infrastructure because of this bonanza’s promise,” he said. “Cuba is starting to move away from its evolutionary model of economic reform. A lot of people are being taken off the government dole, and there’s some anxiety.”
The government nevertheless is not moving quickly, which is to its advantage as more foreign investments come in to improve ports, refining, storage, and other oil and gas infrastructure, Benjamin-Alvarado said. “Cuba, essentially, will have to play its hand as it deals with energy resources,” he said.
“It will take 5-8 years for Cuba to find enough oil offshore to break even,” Pinon said. “Some US diplomats may believe the political risk of not doing anything is small relative to other countries. Cuba production would have little impact on US supplies. But every barrel found and produced there would back a barrel of Venezuelan crude out for sale to other countries.”

Source : Oil&Gas Journal

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