Cuba faces a growing energy crisis that is likely to be exacerbated by U.S. sanctions targeting foreign investment in that country.
The Helms-Burton Act seeks to block international companies from profiting from the use of U.S. assets expropriated by Cuba in the 1959 revolution, targeting those with U.S. subsidiaries.
The law had been adrift in the U.S. Senate until Cuban jet fighters last February shot down in international airspace two aircraft flown by Cuban dissidents. The resulting public outrage in the U.S. led to its swift passage and President Bill Clinton signing it into law.
However, just when the law was to take effect in July, Clinton suspended its implementation for 6 months with the promise of an extension if allies join U.S. efforts to isolate the government of Fidel Castro.
Helms-Burton already has spooked some companies out of Cuba for fear of retaliation to their U.S. subsidiaries. Others are ignoring the law.
But the international petroleum industry, with a heavy concentration in the U.S., is more likely to shy away. And that will only worsen the situation for an energy-starved Cuba that was abruptly weaned from subsidized Soviet oil imports with the collapse of the Soviet Union.
Price increases hurting
Adding to its energy woes, recent increases in international oil prices are hitting hard at Cuba, which depends heavily on imported crude and products.
Interviewed by a Cuban newspaper, Cuba's Deputy Economy Minister Jose Gonzalez, said, "This situation hurts us a great deal, since prices are going up for the products we need most and, in many cases, we are obliged to sell our products (domestically) at approximately the same prices."
Earlier this year, Cuba projected its average 1996 petroleum costs at $135/metric ton, but recent price hikes have raised the figure to $175/ton.
Gonzalez also said that owners of private cars have received their rations of gasoline only four times this year.
Under Cuba's fuel rationing system, the highest priorities are assigned to government operations (especially the military), electric power generation, and the sugar, nickel, and tourism industries.
Cuba's economy has been crippled since the dissolution of the Soviet Union in 1989 eventually eliminated Havana's access to abundant crude and products at subsidized prices.
Cuba's oil supply, imports
Cuba expects to produce a total of about 11 million bbl of crude oil this year, about the same as last year, according to Juan Fleites, general manager of Cupet Comercial SA, a subsidiary of Cuba's national oil company Cupet.
Exploration efforts by about 10 international oil companies working with Cupet, plus the increased use of enhanced recovery, have failed to raise output, leaving the Caribbean nation with a heavy dependence on imported refined products and severe fuel shortages.
Cuba, which currently produces a little more than 30,000 b/d of crude, has to spend about 40% of its export revenues on petroleum imports.
According to Cupet, the country requires about 54.75 million bbl/year of crude and products. With domestic output of both stagnating, Cuba must import 43.8 million bbl/year.
Prior to the demise of the Soviet Union, Cuba used 73-87.6 million bbl/year of crude and products. Since then, the country has heavily rationed the use of petroleum, made efforts to apply energy conservation, and watched its economy crash due to extreme shortages of refined products.
The Soviets formerly supplied Cuba with crude and refined products under highly favorable terms, essentially a subsidy.
Cuba now obtains its imported crude and products on international markets.
Exploration efforts
Cupet is not currently exploring, but foreign companies working under production-sharing agreements are conducting seismic work and drilling three wildcats onshore, an official with the state company said.
The government has contracts for exploration for seven onshore and 15 offshore blocks.
Cuba's last discovery was Cupei 1X, an offshore well completed at yearend 1995. Cupet said the well flowed on test at a rate of 3,700 b/d of 16° gravity crude.
The Helms-Burton Act has not yet forced any foreign oil companies to leave Cuba, a U.S. official said. France's Total pulled out in 1995 after working under a risk contract for about 5 years, and a Canadian company, Talisman Energy Corp., sold its Cuban interests in 1994 because its exploration results were disappointing.
Companies from Canada, the U. K., and a few other countries reportedly are exploring in Cuba under production-sharing agreements. But the companies-and the Cuban government-fear future sanctions under the Helms-Burton Act.
Cupet said that it is looking for foreign companies to explore 12 other blocks under production-sharing agreements.
It is also seeking partners to add vacuum distillation and cat cracking units to its Cienfuegos refinery, a project started by the Soviets in 1985 and never completed. However, the current political tensions between Washington and Havana and the threat of sanctions under Helms-Burton make any new agreements unlikely.
Cuba currently produces just a little more than 30,000 b/d of crude with gravities of 10-27° in four fields: Boca de Jaruco (discovered in 1968), Varadero (1969), Perifericos (1972), and Pina (1989). It also has other small, undeveloped oil fields.
Copyright 1996 Oil & Gas Journal. All Rights Reserved.
