Russia jockeying for Cuban oil

MIAMI, Nov. 26 (UPI) -- Russian oil companies are expressing an interest in tapping Cuba's offshore oil potential ahead of an official state visit by Russian President Dmitry Medvedev.

Moscow's top diplomat in Cuba earlier this week said Russian petroleum firms have designs on drilling in waters in the Gulf of Mexico off Cuba's northern shores, an area Cuban energy experts say contains an estimated 20 billion barrels under the ocean floor.

Numerous foreign energy firms, in addition to Russia's Gazprom and LUKoil, are eager to begin drilling off the coast of Cuba. Spanish firm Repsol has led a group of interested oil companies in drilling the first test well. Brazilian oil giant Petrobras is a likely candidate to lead the drilling off Cuban shores because of its expertise in deepwater production.

U.S. petroleum companies are forbidden from doing business with the country because of the longstanding American trade embargo against the communist island. However, some lawmakers on Capitol Hill have called for a softening of the embargo so that American companies might join in exploring the waters off Cuba.

While Russia appears keen on joining the ranks of nations hoping to tap into the Cuban oil market, oil experts like Jorge Pinon, an energy fellow at the Center for Hemispheric Policy at the University of Miami, contend Moscow could be making "more of a political statement than anything else."

"If you talk to more experts, they will tell you ... the reason Russia (is doing) it is to send a political message to the U.S.: 'Stay out of our back yard,'" Pinon told United Press International, referring to the proposed U.S. missile defense shield in Poland and Washington's strong ties with Georgia.

Pinon also noted that Russian petroleum firms lack the deepwater expertise of other countries jockeying to drill in Cuban waters such as Brazil, Malaysia and, in particular, Spain.

Pinon said sources in the industry indicated that Repsol could begin drilling a second test well in Cuban waters as early as the second quarter of 2009.

Earlier this year Cuba's state-run energy company Cubapetroleo -- or Cupnet, as it is better known -- said full-scale production could begin in the region sometime next year.

Russia could very well be a player in that race for Cuban oil. In October, following days of bilateral talks in Havana, Russian officials said they were eager to help Cuba rebuild its energy sector and would help the country acquire a fleet of oil tankers.

Relations between the former Cold War allies deteriorated after the collapse of the Soviet Union, though in recent months Moscow has signaled its interest in restoring those ties.

Last year Venezuela helped Cuba restore operations at a Soviet-era oil refinery, a relic of the Soviet Union's sway over Cuba until its decline in the late 1980s.

The refinery had been dormant since then, though with the help of Venezuela and some $136 million in repairs funded by Caracas, the plant went back online in December 2007.

The Camilo Cienfuegos refinery currently is operating at 60 percent capacity, according to the University of Miami's Cuban Studies program.

Cuban officials have lauded the return of operations at Cienfuegos, though some speculate the plant may need still more work before becoming fully operational because of its longtime dormancy.

"It was a mess, that refinery," said Larry Birns, director of the Council on Hemispheric Affairs in Washington and noted expert on Cuba.

Meanwhile, five international oil companies have paid reserve fees to the Cuban government to secure exploration rights.