Granma | 15 February, 2017
Even as Cuba invites foreign capital to invest in the country’s oil and gas industry, no chance is ever overlooked to reiterate the guidelines that govern how business is done in this sector on the island.
Cuba Oil & Gas 2017, a meeting recently held in Havana with more than 250 participants from countries such as Canada, the United States, Mexico, Venezuela, Brazil, Argentina, the United Kingdom, France, Italy, Germany, Spain, Russia, China, India and Australia, served to emphasize that the country’s program for the development and exploitation of its resources is based on the goal of energy independence.
Organized by Britain’s International Research Network (IRN), with the help of Cuba’s state oil company, Cuba Petróleo (Cupet), the gathering attracted some 70 specialized companies – with presentations, discussions, negotiating sessions, and guided tours – to exchange information and offer a close-up look at the Cuban energy panorama, highlighting the opportunities made available through the new foreign investment law, number 118, approved in 2014.
According to the IRN’s business development director, Paola Galanti, the conference was planned as “an event specifically for Cuba, because it appears to be the moment when the island has all the cards to attract investment, and no one wants to be left out.”
Cupet is responsible for exploration and production of fuels, as well as exports and imports; refining crude oil; fabricating oil-based lubricants; and sales of gasoline and lubricants. The company recognizes the importance of advantages provided in the new foreign investment law, including government support with fiscal and tax incentives, as well as the country’s political stability, security, energy potential, low costs of operation, and the existence of logistical infrastructure.
Yet the presence of foreign capital in the energy sector is nothing new. In 1995, tourism and the oil industry became pioneers in the opening of the country’s economy, although no 100% foreign-owned companies are accepted to operate in the petroleum sector.
Rubén Cid, deputy minister of Energy and Mining, explained that in the early 1990s, a new era in the country’s oil industry began. Since then, to date, thousands of square kilometers have been seismically tested, 2D and 3D; dozens of wells have been drilled, both on land and in territorial waters; while more than 42 contracts of various kinds have been signed with international companies.
Alberto Ramos, representative of Petróleos de Venezuela, S.A., added, “We have been in Cuba since 2007; we have carried out intensive seismic testing campaigns, and continue to carry out studies, because Cuba’s petroleum potential is definitely very attractive.”
INVESTMENT IS NOT DOMINATION
Referring to the principal guidelines directed toward obtaining oil and natural gas, established in the country’s Global Energy Strategy, Cid emphasized that these have led to “an ambitious project to notably improve electrical infrastructure and install new thermal generating plants,” as well as accelerating the use of renewable energy sources.
The deputy minister recalled that since the energy efficiency policy was approved three years ago, projecting that 24% of the country’s usage be produced with renewable resources, the figure now stands at only 4%. Progress is being made toward meeting this goal with the construction of eolic and photovoltaic parks, and the use of sugar cane bio-mass.
Cuba has currently reached an annual production of four million tons of oil equivalent. This equivalence factor is used to reflect the differing quantities of gas and oil needed to generate the same amount of electricity. Every 24 hours, the country produces around 75 million barrels of oil equivalent – reflecting that for every barrel of crude oil produced, the equivalent is between 60 and 75 cubic meters of natural gas.
Roberto Suárez, Cupet adjunct director, reported that 97% of the gas produced in Cuba is used to generate electricity or directly consumed by the population in Havana, for cooking. Across the island, 95% of electricity is generated with oil or its derivatives, be that crude oil or gas in thermal-electric plants.
What the expert most emphasized is that, without making any new discoveries since the beginning of the century, the state oil company has achieved stable production, due fundamentally, he said, to the optimal exploitation of fields already in use, and adaptations made to address the natural drop in production of these long-exploited wells.
Nonetheless, the company founded in 1992 has projected, in its plan through 2030, increasing production on land and in territorial waters, as well as raising the rate of recovery in existing fields – which is only between 6 and 7% – via the introduction of enhanced recovery technology; the exploitation of non-conventional fields; and the use of horizontal drilling to explore areas close to productive areas.
Enhanced recovery, for example, requires significant financing, and includes methods such as the injection of water, or the use of chemical products, steam, or foam, when oil does not flow on its own or cannot be pumped.
Cupet, which manages 35 national companies and five joint enterprises with more than 63,200 workers, has already begun work on the extraction of non-conventional oil, dense crude found in highly porous rock above oilfields, which has been absorbed from deeper zones.
In other words, the key to increasing production lies in joint ventures and improved operations, as well as the development of infrastructure and financial services, which implies the transfer of advanced technology and the discovery of more extractible resources.
In particular, international investment in the Cuban oil industry is needed to expand storage capacity, specialized transport, and the transfer of fuels, as well as improved technology for the production of lubricants.
Likewise prioritized is the search for long term financing to modernize Cuba’s four refineries, and the introduction of liquid gas in the generation of electricity in combined-cycle power plants. These are ways to improve economic efficiency, and substantially reduce carbon emissions into the atmosphere, Cid stated.
A CLOSE-UP OF CUBA’S EXCLUSIVE ECONOMIC ZONE
While almost all of Cuba’s oil production is concentrated in the Northern Coast Heavy Crude Fields, located in 750 square kilometers between Havana and the Hicacos Peninsula of Matanzas, experts nationally and internationally agree that the country’s Exclusive Economic Zone in the Gulf of Mexico “holds large reserves of petroleum and gas, and the discovery of important fields in the zone is probable,” Cid stated.
The country’s Exclusive Economic Zone in the Gulf has been open to investment since 1999, and includes an area even larger than the island itself: more than 114 square kilometers, divided into 59 blocks of some 2,000 square kilometers each.
Within these waters, which vary in depth between 500 and 3,600 meters, four exploratory wells have been drilled, one in 2004 and three in 2012, according to Suárez, who added that all have detected evidence of oil.
Since deep water exploration in Cuba’s Exclusive Economic Zone is open to international participation, a significant effort has been made to conduct seismic testing, more than 30,000 square kilometers with 2D and more than 10,000 with 3D.
It is worth repeating that Cuba is practically unexplored territory when it comes to oil, producing a little more than 40% of its consumption. Given that it is located within a giant oil-rich basin, the country’s Exclusive Economic Zone in the Gulf of Mexico has attracted the most attention among offshore exploration investment opportunities.