The Russians are coming — for Cuba's oil

The Russians are coming — for Cuba's oil
by Stuart Hampton, August 25th, 2009, Tuesday.
Category: Energy & Utilities, In the News

As a conscious 11-year old during the 1962 Cuban Missile Crisis, the
idea that someday Russia might be allowed to drill for oil 45 to 90
miles from Florida seemed unthinkable. But in the post Cold War world,
it is not only thinkable, it is actually happening. In late July, 2009
Cuba and Russia and inked a deal to allow them to jointly search for oil
in the Gulf of Mexico. In return, Russia granted Cuba $150 million in
credit for farm machinery and construction materials that were sent to
Cuba last year to help in areas damaged by three recent devastating
hurricanes.

The oil deal with state oil monopoly Cubapetroleo allows for Russian
exploration and production company Zarubezhneft to search for oil and in
the deep waters off of Cuba's coastline (North and west of Havana). The
accord is a follow up from a Moscow meeting in January when Zarubezhneft
and six other Russian companies signed a memorandum of understanding
agreeing to work with Cubapetroleo in exploration and production
activities in Cuba's Gulf of Mexico.

Cuba's onshore production of about 60,000 barrels of oil per day is all
heavy oil with a high sulfur content (which requires extensive and
expensive refining processes to convert to automobile fuels and other
refined products). Its offshore Gulf waters, by contrast, could contain
vast quantities of lighter, sweet crude oil. A Cuban official claims
that it may contain 20 billion barrels of oil (although the U.S.
Geological Survey puts its estimate closer to 5 billion barrels of oil,
and a test well drilled by a Repsol YPF consortium in 2004 produced only
modest results)

Cuba began opening up 59 blocks in the Gulf for exploration by foreign
companies in 1999. By March 2009 Cuba had 21 of these under lease to
seven companies, with 23 more in negotiation. Russia is not the only
country to cut deals with Cuba for a stake in the potentially lucrative
Gulf waters. Venezuela's state oil company PDVSA plans to begin drilling
in 2010. Brazil's PETROBRAS has also leased a block and plans to begin
its initial seismic surveys this year. In 2008 China's premier oil
explorer — China National Petroleum Corp. also signed a deal with
Cubapetroleo to jointly develop oil and gas fields.

Notice which country is missing from the growing oil rush? The one that
sits 45 miles to the north of the exploration area. The United States of
America.

Which takes me back to the time of the Cuban missile crisis and the
before that the nationalization of American oil companies (in 1960),
which resulted in the Foreign Assistance Act of 1961 – restricting all
trade with Cuba (see Cuba Libre). For the next thirty years (before its
collapse in 1991 collapse) the Soviet Union provided billions of dollars
in trade and annual subsidies to Cuba. But after years of neglect and
underinvestment, both Cuba and Russia (and China and Brazil and
Venezuela) have seen advantages to getting a piece of the action (the
potential billions of dollars available in a successful oil rush in
Cuban waters).

Will the US really miss out on exploiting the Western Hemisphere's last
wild card of oil exploration when it is right under its nose?

The Russians are coming — for Cuba's oil « Bizmology (25 August 2009)
http://www.bizmology.com/2009/08/25/the-russians-are-coming-for-cubas-oil/