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Analysis: Cuban energy may get shakeup

By CARMEN GENTILE, UPI Energy Correspondent   |   Feb. 20, 2008 at 12:04 PM   |   Comments

MIAMI, Feb. 20 (UPI) -- With Fidel Castro deciding to not pursue another term in office, Cuba will become the focus of a regional tug-of-war over its oil and ethanol sectors, experts say.

An end to Castro's nearly half-century reign means his successor, most likely his younger brother Raul, will be faced with tackling many worrisome issues -- among them the island's chronic energy woes. Rolling blackouts have been troubling the island for several years due to faulty and old power plants and a lack of resources to repair them.

Amid this disarray, Cuba has come to rely heavily on discounted Venezuelan oil to meet its domestic energy needs. Castro forged a strong father/son-like relationship with Venezuelan President Hugo Chavez, who has in many ways emulated Castro's politics and policies in Venezuela. However, it's uncertain if Raul Castro will forge the same bond with Chavez, particularly when it comes to the oil sector, said Jorge Pinon, a researcher at the Institute for Cuban and Cuban-American studies at the University of Miami.

Raul Castro, according to Pinon and others, is expected to court other Latin American energy firms in the hopes of reinvigorating Cuba's sugar sector, once a world leader, in the hopes of capitalizing on the growing worldwide popularity of ethanol. Both Fidel Castro and Chavez have spoken out against ethanol production saying reliance on the alternative fuel would cause sugar prices to spike and take food from the mouths of many.

In the likely event that Raul Castro is Cuba's next leader, state-run energy companies such as Petrobras in Brazil, a world leader in ethanol production, will be keen to discuss doing business with Havana and setting up shop in Cuba to help get its sugar sector back online.

"I think Raul will have certain opportunities he'd like to pursue with Brazil and Petrobras," Pinion told United Press International, adding Brazil has already expressed a desire to "play a role in Cuba's ethanol potential."

However, a move to jump-start a Cuban ethanol sector could prompt Chavez "to pull the oil card" and threaten to rescind its discounted oil program, Pinon said, putting pressure on Raul Castro to remain faithful to Venezuelan oil at the price of having to forgo a move into ethanol, at least for now.

"Cuba's reliance on Venezuelan oil is the country's Achilles heel," he said.

Meanwhile, Brazil recently took key steps to secure its future in Cuba's energy sector for years to come. Last month it signed a deal with Cuba to begin exploring its potentially oil-rich waters in the Gulf of Mexico in exchange for a multimillion-dollar aid program.

Brazilian President Luiz Inacio Lula da Silva met with Raul Castro to ink the deal that would give Brazil's Petrobras access to Cuban waters, where it hopes to begin drilling in the next two years.

According to the U.S. Geological Survey, some 4.6 billion barrels of crude oil and 9.8 trillion cubic feet of natural gas may well be lurking below the ocean floor of the Northern Cuban basin. The reserves are said to possibly rival the estimated reserves in Alaska's Arctic National Wildlife Refuge. That kind of crude would more than meet Cuba's daily oil intake -- about 205,000 barrels per day -- and provide enough excess to transform the country from being dependent on the largesse of Chavez to a global player on the oil market.

Some analysts are skeptical of Cuba's potential oil wealth.

"Cuba's oil potential is just that, potential," Larry Birns, director of the Washington-based Council on Hemispheric Affairs think tank, told UPI.

That skepticism hasn't been enough to dissuade nations from wanting to enter the Cuban petroleum race.

In December Chavez traveled to Cuba for the grand reopening of a Soviet-era oil refinery.

The refinery has been dormant since the late 1980s, though with the help of Venezuela and some $136 million in repairs funded by Caracas, the plant is expected to go online Friday, according to Cuban state media.

The plant will reportedly be able to process some 65,000 bpd. Venezuela in the meantime sends about 100,000 bpd to Cuba as a discounted price, part of Chavez's Petrocaribe agreement for Caribbean nations.

© 2008 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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