Oct 11, 2010
OGJ Washington Editor
WASHINGTON, DC, Oct. 11 -- 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, experts generally
agreed at a forum on Oct. 8. "What we're seeing could be a potential
game changer," said Kirby Jones, president of the Alamar Associates
consulting firm. "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."
US not out yet
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
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
Contact Nick Snow at email@example.com.