Financial Times Surveyad
Cuba / Production Sectors
Top Stories
Politics & Economy
Service Sectors
Production Sectors
Fact File Homepage

OIL: Expansion plans are in the pipeline
Daily production has tripled in the past seven years, but the country still needs to import 80 per cent of its requirements, reports Pascal Fletcher

Cuba"It may be heavy, but it's ours." This is how Cuban oil industry official Manuel Marrero refers with pride to the smelly, sulphurous heavy crude oil that Cuba, with the help of several foreign companies, is extracting from local wells.

Thanks to this help, Cuba's domestic oil production has more than tripled: from 528,000 tonnes (10,500 barrels per day) in 1991 to 1,678,000 tonnes (33,500 bpd) last year and the industry has set a production target of 2m tonnes (40,000 bpd) for 1999. The bulk of this is heavy crude.

The island is still forced to import about 80 per cent of its oil needs, mostly from Venezuela and Mexico. But it used locally-produced crude to generate 33 per cent of its national electricity in 1998 and hopes to increase this contribution to 42 per cent this year.

"Our goal is self-sufficiency," says Mr Marrero. This may seem like a fantasy, unless, of course, current exploration efforts achieve the fabled big strike of good-quality light oil that all oil prospectors dream about. Such a find has eluded the Cubans and their foreign partners so far, although there have been three new discoveries of heavy oil.

The most recent was announced by Montreal-based Pebercan Corporation whose Canasi 1 well, drilled in onshore Block 7 on Cuba's northern coast, was reported to be producing about 1,500 bpd.

Pebercan's major shareholder is French poultry magnate Gerard Bourgoin, while French actor Gerard Depardieu also has a stake in the firm.

In all, nine foreign companies - five of them from Canada, the rest from France, Spain, Sweden and Brazil - are presently helping the Cubans to explore 20 concession blocks - four offshore, 16 onshore - out of a total of 45 earmarked for foreign participation.

The exploration results so far have been mixed and have yielded almost exclusively heavy oil. Besides Canasi 1, there have been two other heavy oil discoveries, one at Puerto Escondido and the other at Majaguillar, both on what Mr Marrero likes to call the north Cuban heavy oil belt.

The exploration programme for 1999 foresees the drilling of 10 test wells, all by the foreign companies. "We are at the moment of truth," says Mr Marrero.

Calgary-based Canadian firm, Genoil Inc, a subsidiary of Beau Canada Exploration, is drilling this year in onshore Block 20 in southeast Cuba.

Crude oil production

By far the most active foreign company operating on the island in risk exploration and production sharing agreements is Sherritt International of Canada, which produces about one third of the oil lifted from domestic Cuban wells and acts as operator in a lot of the exploration.

Last November, Brazil's Petrobras also joined the hunt for oil in Cuba, announcing it would use its deep-water expertise to explore offshore Block 50, which is 185 miles east of Havana.

Since foreign companies started working in the Cuban oil sector after 1990, a number have withdrawn for both technical and financial reasons. The most recent was Premier Oil of Britain, which pulled out in December after a well drilled on its Violeta prospect in onshore Block 21 tested dry.

Another British company, British Borneo, pulled out in 1997, as did France's Geopetrole.

Total of France, the first western oil company to sign a contract with Cuba in 1990, stopped its exploration activities in 1994 after failing to make a major find.

Cuban officials say $345m was invested in Cuba's oil sector in the last seven years, $226m in exploration and the rest in production. Investment in 1999 is forecast at $60m.

The island is now also seeking to utilise the resources of gas that exist in the heavy oil deposits. Raw gas production increased from a low 32m cubic metres in 1997 to 120m cubic metres last year.

This is expected to rise further to 450m cubic metres this year as new projects for use of the gas develop.

Sherritt and the Cuban state oil company, Cubapetroleo, are partners in a $150m gas-for-energy venture that is using Cuban raw gas from north coast wells to generate electricity.

Through contracts which place the risk costs of exploration firmly in the hands of the foreign companies, Cuban oil industry officials feel that they have nothing to lose in continuing the current strategy of squeezing every last drop of heavy oil out of existing wells and hunting for new deposits. "It's worth it," says Mr Marrero.

Related Links
Bitter taste from loss of customers
Lighting up the world
Modernisation programme picks up pace

Related Links
Office of Industrial Property
Center for Export Promotion of Cuba
Granma International
Radio Habana Cuba Specials
Energy & Utilities Review
FT Director
FT Telecoms
[ Back to top ]

  © Copyright The Financial Times Limited 2000. "FT" and "Financial Times" are trademarks of The Financial Times.
Privacy Policy | Terms & Conditions.