Cuba’s Oil Dreams Dealt Crushing Blow

Cuba’s oil hopes are hanging on its last thread, reported the Associated Press on Tuesday, after Spanish oil Repsol announced its decision to cease all oil exploration efforts in the country following more than $100 million spent drilling only to hit a dry well.

Cuba’s oil hopes are hanging on its last thread, reported the Associated Press on Tuesday, after Spanish oil Repsol announced its decision to cease all oil exploration efforts in the country following more than $100 million spent drilling only to hit a dry well.

Speaking to investors and reporters in the Spanish capital of Madrid, Repsol Chairman Antonio Brufau admitted that his company would not drill another well in Cuba for the next four years at least; and warned later that the company had no further plans to conduct any activity after this period.

[quote]”The well we drilled turned out dry and it’s almost certain that we won’t do any more activity there,” he said.[/quote]

The Spanish company’s decision as such could leave Cuba with little choice but to rely on Venezuela for its energy needs, with Venezuelan President Hugo Chavez currently providing Cuba with $3 billion worth of heavily subsidized oil every year.

This source of energy though appears to be increasingly fragile with Chavez presently suffering from cancer. Cuba’s oil deal with his country may evaporate if he dies or fails to win re-election in October.

Consequently, Cuba’s final shot at energy security will come from Malaysian state oil company Petronas, who started drilling last week in an area just 180km southwest of Repsol’s drill site. Results are only expected by July.

“If oil is not found now I think it would be another five to 10 years before somebody else comes back and drills again,” told Jorge Pinon, the former president of Amoco Oil Latin America and a leading expert on Cuba’s energy prospects, to a separate Associated Press article.

[quote]“Not because there is no oil, but because the pain and tribulations that people have to go through to drill in Cuba are not worth it when there are better and easier options in places like Angola, Brazil or the U.S. Gulf of Mexico,” he explained.[/quote]

The problem is exacerbated further by the fact that Cuba can not borrow money from international lending institutions for their own oil efforts, and the island’s own poor record of repayment has left private creditors wary.

Victor Shum, an energy analyst with consulting firm Purvin & Gertz, believes that Cuba would still face financial difficulties even if they do discover oil.

“Assuming they’re successful in finding oil, to bring the oil to market will take years of development efforts,” Shum said.

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Yet, Pinon is optimistic that an oil discovery could improve relations between the U.S. and Cuba.

[quote]“A lot of folks are looking at the energy sector in Cuba because they are looking at a Cuba of five years from now, or 10 years from now. So a lot of people are betting that either the embargo is going to be lifted, or the relationship between the U.S. and Cuba is going to improve in some way.”[/quote]