U.S. firms eager to test oil potential off Cuba

Posted on Thu, Feb. 02, 2006

PETROLEUM
U.S. firms eager to test oil potential off Cuba
American energy executives this week will meet their Cuban counterparts
in the first private-sector oil summit between the two countries.
BY JULIE WATSON
Associated Press

MEXICO CITY - In the two years since oil reservoirs were discovered off
Cuba's coast, Canadian, Chinese, Indian and Norwegian companies have
lined up to explore the potentially lucrative Caribbean waters.

U.S. corporations, however, have watched the activity less than 60 miles
south of Florida's coastline with their hands tied. U.S. oil exploration
in Cuban waters -- along with most U.S. trade -- is prohibited under a
45-year-old U.S. embargo designed to undermine Fidel Castro's communist
government.

This week, American energy executives will meet their Cuban counterparts
in the first private-sector oil summit between the two countries. Cubans
hope to inform the businessmen of their country's oil potential while
undermining the embargo, which has often frustrated American corporations.

The three-day meeting, which kicks off today, is sponsored by the
U.S.-Cuba Trade Association, along with Valero Energy Corp., the United
States' biggest oil refiner; the Louisiana Department of Economic
Development; and the Texas Port of Corpus Christi, among others.

Representatives from major U.S. oil companies are also expected to
attend, said Kirby Jones, president of the U.S.-Cuba Trade Association.
Jones's consulting firm, Alamar Associates, organized the meeting.

Cuba's delegation was to be led by Fidel Rivero Prieto, president of the
state oil company, CubaPetroleo.

Officials from the Cuban Ministry of Basic Industries and Cuba's
ministries of foreign trade, foreign investment and foreign relations
will also be present, Jones said.

Aided by Canada's Sherritt International Corp., Cuba has steadily
increased output of low-quality heavy crude and now produces 75,000
barrels daily, about half of what it needs.

It imports the rest, much of it on favorable terms from political ally
Venezuela.

It also has turned to other foreign companies to explore further. In
2004, the Spanish petrochemicals company Repsol-YPF SA announced it had
found petroleum reservoirs off Cuba's coast. The first well was not
considered commercially viable, but the company recently announced it
will conduct a second exploration.

This time, however, Repsol will join up with China's largest offshore
oil producer, CNOOC Ltd.; Norway's industrial company Norsk Hydro ASA;
and India's state-owned Oil and Natural Gas Corp., ONGC.

The group will explore seven deep-water blocks estimated to contain more
than 4 billion barrels in oil and gas reserves. Earlier explorations,
however, turned up only modest discoveries.

The petroleum reservoirs have fueled the Cuban government's hopes of
increased self-sufficiency amid tightened U.S. sanctions.

Since 2004, Cuba has pumped $1.7 billion into its energy sector with
help from Canada, Europe and Latin America, Rivero Prieto said in a
letter to the summit's organizers.

Rivero Prieto said Cuba also would welcome U.S. companies, adding,
``Unfortunately that is not possible now.

``But we can begin the process to get to know each other, exchange
contact information. . . . In this way, both of us will be prepared to
discuss real business opportunities as soon as that becomes possible.''

Mike Olivier, secretary of the Louisiana Department of Economic
Development, agreed.

''Nobody wants to be left out, and the potential business in this new
market for Louisiana companies is significant,'' Olivier said.

Jones said he would like to see the U.S. government relax its sanctions
for the energy sector as it did for food and agricultural products under
a 2000 law allowing sales to Cuba on a cash basis.

Cuban officials say they have contracted to buy $1.5 billion in American
food since Castro's government began taking advantage of the change in
2001.

Cuba was almost wholly dependent on oil imports and imported most of its
supply on extremely favorable terms from the former Soviet Union.

It stepped up its own exploration after the collapse of the Soviet bloc.

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