Cuba Chases 5 Billion Barrels of Undiscovered Oil; U.S. Intervenes

William Pentland
Forbes, September 4, 2011

The island nation of Cuba is scrambling to secure access to what it believe to be about 5 billion barrels of oil lying deep under the ocean off its northern coast. A massive drilling rig is en route to Cuba and plans to start drilling in a matter of months. Meanwhile, the United States government is sufficiently concerned about the risks of another oil spill that is dispatching a group of quasi-diplomats to Cuba on a fact-finding mission as early as tomorrow, according to reports in Dow Jones. U.S. officials believe Cuba’s waters could contain more than 5 billion barrels of undiscovered oil. Cuba will begin a plan to tap its offshore oil later this year, when a consortium led by Spanish company Repsol YPF S.A. plans to start drilling a well in more than 5,500 feet of water off the country’s northern coast, which will likely trigger a race to set up production in Cuban waters, presuming Repsol finds oil.

If oil is discovered, Cuba will reduce its reliance on Venezuela for its energy needs. In 2009, Cuba produced roughly 50,000 barrels of oil a day from onshore and coastal wells and relied on imports from Venezuela to supply an additional 130,000 barrels to meet consumption levels, according to the U.S. Energy Information Administration. Repsol will be drilling in waters that are deeper than those in which the Deepwater Horizon rig operated at the time it exploded last year. Repsol will be using a Chinese-built drilling rig that only recently left Singapore for Cuban waters. The rig, known as Scarabeo 9, is expected to arrive in November or December. Scarabeo 9 is a semi-submersible drilling vessel recently built by Yantai Raffles, which will be on contract by Repsol YPF for deepwater exploratory drilling off Cuba.

In response to Cuba’s drilling plans, the U.S. is sending a delegation led by Bill Reilly, co-chief of the Deepwater Horizon oil spill commission, to Cuba next week to help evaluate that country’s plans for developing its oil resources, according to reports by Dow Jones. The delegation will be on a fact-finding mission to determine the country’s long-term plans for pursuing its oil resources and identify steps to ensure safety and environmental protection.

Castro Regime's Survival Depends Greatly on Ill Venezuelan Leader's Largess

WSJ.com
JULY 20, 2011
In Cuba, a Prayer for Chávez
By JOSé DE CóRDOBA
CARACAS—Venezuela's ailing President Hugo Chávez says he is praying to Jesus Christ, the Blessed Virgin and the spirits of the Venezuelan savannah to help him beat his cancer.
Mr. Chávez hasn't mentioned it, but probably no one is praying harder for his health than Fidel and Raúl Castro in Cuba. Their ossified regime now largely depends on help from their ally in Caracas and they will do everything possible—short of an invasion—to keep Mr. Chávez or a like-minded ally in power, say U.S. officials, Venezuelan opposition leaders and analysts. Venezuela ships about 115,000 barrels per day of oil at cut rate prices to Cuba, meeting about 60% of the island's oil needs, according to a recent Brookings Institution paper, which calculates the value of the oil and other Venezuelan aid at about $5 billion a year, a major portion of Cuba's hard-currency earnings. In exchange, Cuba has sent to Venezuela tens of thousands of Cuban doctors, sports technicians, and intelligence and security experts, helping Mr. Chávez stay in power. Havana's relationship to Venezuela is akin to its economic dependence on the former Soviet Union in the 30 years before the collapse of the Soviet Union in 1991, which led to a 35% fall in Cuba's economy.

"To save Chávez is to conserve [Raúl's] presidential seat," wrote Yoani Sánchez, a well-known Cuban blogger and critic of the regime. "To lose him could lead to [Raúl's] own downfall."

Were Mr. Chávez to become gravely ill—he arrived in Havana Saturday to undergo chemotherapy after doctors recently removed a "baseball-sized" tumor—the Cuban government is likely to use its sway to try to shape events. Analysts say the Cuban leadership has significant clout, owing to its relationship with Mr. Chávez and top Venezuelan officials. The Cubans could also deploy their intelligence services to help one faction at the expense of another. "Cuba is the most important foreign power with a stake in Venezuela," said Moisés Naím, a former Venezuelan cabinet minister and an analyst at the Washington-based Carnegie Endowment for International Peace. "They are not going to be passive bystanders. They will be players." There is no political relationship in the Americas quite like the tie between Fidel Castro and Mr. Chávez. Mr. Castro, who officially handed power to his younger brother Raúl in 2008, has been a mentor, spiritual and political father, savior, psychiatrist, and even bedside doctor to Mr. Chávez. In return, Mr. Chávez has bankrolled Cuba's government and given Mr. Castro occasion to dream again of a Latin America united against his bëte noire, the U.S., or as both men sometimes call it, "the empire."

At times, Mr. Chávez and top Cuban officials have talked of melding the two countries into a single confederated state—an unpopular idea among most Venezuelans. "Cuba has two presidents, Fidel and Chávez," said then Cuban vice president Carlos Lage on a visit to Caracas in 2005. Two years later, the Venezuelan president said virtually the same thing. "Deep down, we are one government," said Mr. Chávez during a visit to the island.

During his tenure, Mr. Chávez has tried to indoctrinate the Venezuelan military, bringing on thousands of advisers to replicate Cuban military doctrine, and to deal with security and intelligence issues. Cuban officers are deeply involved in intelligence and security matters in Venezuela, from the acquisition of military equipment to overall military strategy, according to people with knowledge of the matter. One source estimates the number of Cuban intelligence experts working in Venezuela at 3,000. Last year, Brig. Gen. Antonio Rivero, once the head of Venezuela's civil defense, resigned his commission because of what he said was Cuban interference and influence at all levels of the armed forces. Shortly after, he was accused of revealing state secrets and forbidden by a judge from speaking publicly about the military. On Tuesday, Jorge Giordani, Venezuela's finance minister, said there was no doubt Mr. Chávez would run for re-election in 2012. Nonetheless, if Mr. Chávez dies or is too ill to run, his movement, divided by money, ambition, ideology and economic interest, will have a difficult time fielding a candidate who satisfies all factions, analysts say. The Cubans could push for Adan Chávez, Mr. Chávez's elder brother, now a state governor and a former ambassador to Cuba. "They will pick a horse, or more than one horse," Mr. Naim said.

"A negotiation will involve the Cubans," said Alexander Luzardo, an ex-senator and former Chávez supporter. "We will need to talk to them."

Mr. Chávez's relationship with Mr. Castro dates to 1994 when the Cuban dictator invited Mr. Chávez, then an obscure cashiered lieutenant colonel and failed coup plotter recently released from prison, to Havana. Mr. Chávez was given the red-carpet treatment, and even gave a speech to students at the University of Havana. "Fidel saw that in Chávez he had a diamond in the rough," said a former Chávez cabinet minister. "He turned on the full force of his charm and started to work on Chávez."The relationship blossomed when Mr. Chávez, riding a wave of revulsion against corruption, won the presidency in a landslide victory in 1998. Mr. Castro's blessing of Mr. Chávez's "Bolivarian Revolution" endowed the tank commander with revolutionary legitimacy. In return, Mr. Chávez's billions in oil money and his admiration of the Cuban leader have afforded Mr. Castro a chance to extend his revolutionary philosophy, at least by proxy. In 2000, Mr. Chávez took Mr. Castro on a trip to his dusty hometown of Sabaneta in the southern plains state of Barinas. There, Mr. Castro suggested that in 100 years pilgrims would flock to visit Mr. Chávez' humble house, said Luis Miquilena, a former Venezuelan Interior Minister who was on the trip. Mr. Chávez was overcome by Mr. Castro's flattery, Mr. Miquilena said.

A glimpse of how seriously Havana takes the relationship, and the risks should Mr. Chávez leave the stage, was on full display in 2002, when Mr. Chávez was ousted briefly by army generals. Mr. Castro assumed a major role in Mr. Chávez's return to power, as he helped mobilize support among Venezuelan generals and world leaders. Mr. Chávez' return was a lucky break for the Cuban regime. In the 48 hours that Mr. Chávez was out of power, thousands of Venezuelans who were angry over Havana's outsized role in their government surrounded the Cuban embassy in Caracas, demanding the new Venezuelan government cut off ties between the two countries. Meanwhile, Venezuelan officials mulled ending oil shipments to the island. Two years later, Mr. Castro sent thousands of doctors to man Mr. Chávez' neighborhood health program, known as Barrio Adentro,a move that helped revive Mr. Chávez' popularity.

More recently, Cuba last year sent Ramiro Valdez, the regime's legendary secret policeman, on an extended visit to Venezuela, ostensibly to advise Mr. Chávez on Venezuela's spluttering electrical grid. Another leading Cuban official has been a top adviser on Venezuelan agricultural and food issues. Last month, Mr. Chávez credited Mr. Castro, in almost religious terms, with being the first in realizing the Venezuelan leader was ill during his recent trip to Havana."We were...with Fidel, that giant who has surmounted time and place," said Mr. Chávez when he announced for the first time that he had cancer. "He interrogated me almost as a doctor, and I confessed, almost as a patient."

Write to José de Córdoba at jose.decordoba@wsj.com

Drilling off Cuba could be sticky proposition

By Christine Stapleton

The Seattle Times (Cox Newspapers)

WEST PALM BEACH, Fla. — Despite the warnings of Dick Cheney, George Will, Rush Limbaugh and Fox News, the Russians are not drilling for oil off Cuba. Neither are the Chinese. In fact, no one — not even Cuba — is drilling for oil off Cuba. The pesky and persistent rumor, bubbling back up with the Deepwater Horizon disaster, is still nothing more than a pesky and persistent rumor — aired in 2008 by former Vice President Cheney (who got the misinformation from conservative columnist Will), repeated on Fox News and recently revived by conservative radio commentator Limbaugh, who told his listeners 10 days after the spill: "The Russians are drilling in a deal with the Cubans in the Gulf. The Vietnamese and Angola are drilling for oil in the Gulf in deals with the Cubans. "However, as oil from BP's exploded well continues surging from the Gulf floor and washing onto Panhandle beaches, the rumor is poised to become fact. Repsol, a Spanish company, expects to begin drilling off Cuba in 2011, according to published reports and oil-industry analysts. Companies from at least 10 other countries, including Russia and China, are negotiating or already have signed lease deals to drill off Cuba. Should the United States be concerned about drilling off Cuba? Yes, according to Jorge Piñon, former president of Amoco Oil Latin America and now a visiting research fellow with the Cuban Research Institute at Florida International University. "Let's face it, the oil industry is a risky enterprise and there is always concern for a Deepwater Horizon incident," Piñon said. But he added: "If we are going to be afraid of drilling off Cuba, we need to be afraid of the 3,500 rigs drilling in the Gulf of Mexico. "How much oil lies beneath Cuban waters is unknown. Only one exploration well has been dug and hydrocarbons were detected. A U.S. Geological Association survey indicated there are significant reserves. The troubling question for companies hoping to drill is what to do with the oil after they get it out of the ground. Cuba has limited ability to refine oil. The embargo bans U.S. companies from refining Cuba's oil, and two other large refineries in the Caribbean are owned by U.S. companies: Hess in St. Croix, Virgin Islands, and Valero in Aruba. Venezuela's refineries are "maxed out," Piñon said. "Oil has zero value unless you can turn it into gasoline or diesel," Piñon said. "Where are they going to refine it?"

Politics could force an answer to that question. Lifting the embargo and allowing U.S. companies to profit from refining Cuban oil is one option. Another is to continue the embargo and risk Cuba strengthening its friendships with U.S. foes. A refinery on Cuba's northern coast is being built by a partnership between Venezuela and Cuba. "People say they (Cuba) can't or shouldn't do it (drill for oil). Well, forget it," Jones said. "It is going to happen, and you guys in Florida can't stop it, and the U.S. government can't stop it, but you'd better think of a way to deal with it." Zones established by maritime law in 1977 gave the United States and Cuba special rights of exploration and navigation in the Florida Straits.

The boundary of Cuba's Exclusive Economic Zone extends to within 45 miles of Key West. The parcels within the zone that Cuba has leased for drilling are along Cuba's northwest coast — about 65 miles south of Key West. By comparison, the Deepwater Horizon well, as much of a concern as it is to South Florida officials, is 800 miles away. Oil from a spill off Cuba could much more quickly enter the Florida Straits and blanket the Keys and South Florida as it is pulled north on the Gulf Stream. "It's ironic that we have been worried about them drilling when it is us that we had to worry about," said Kirby Jones, president of Alamar Associates, a consulting firm specializing in trade with Cuba. The Deepwater Horizon disaster has forced politicians, policy makers and petroleum companies to rethink how an oil spill off Cuba would play out, Jones said.

Politics, geography and long-standing grudges would make responding to a spill from Cuba much more complex. The 48-year-old Cold War era embargo against Cuba would bar U.S. companies from providing equipment, technology, advice, vessels or personnel to stop and clean a spill off Cuba. "Today, if Mexico or the Bahamas or Canada have a spill, all they have to do is call Houston and in a matter of hours they have access to submarines, skimmers and blowout preventers," Piñon said. "With Cuba, that is not the case. "Wayne Smith, a former chief of the U.S. Interests Section in Havana — the equivalent of ambassador — recently traveled to Cuba with a group of lawmakers from Texas to discuss hurricane preparedness. Conversations quickly turned to the oil spill. With oil from U.S. waters heading toward Cuba and Cuba poised to begin offshore drilling, now would be a good time for the United States to rethink its relations with Cuba and the embargo, Smith said. "Certainly you could make arrangements and exceptions to the embargo," Smith said. "Cuba seems to have the same effect on American administrations as the moon used to have on werewolves."

Cuba orders extreme measures to cut energy use

11 Nov 2009
* Cuba's energy situation termed "critical"
* Some factories, workshops to be closed through December
* Most other economic activities to be reduced
By Marc Frank
HAVANA, Nov 11 (Reuters) - Cuba has ordered all state enterprises to adopt "extreme measures" to cut energy usage through the end of the year in hopes of avoiding the dreaded blackouts that plagued the country following the 1991 collapse of its then-top ally, the Soviet Union. In documents seen by Reuters, government officials have been warned that the island is facing a "critical" energy shortage that requires the closing of non-essential factories and workshops and the shutting down of air conditioners and refrigerators not needed to preserve food and medicine. Cuba has cut government spending and slashed imports after being hit hard by the global financial crisis and the cost of recovering from three hurricanes that struck last year. "The energy situation we face is critical and if we do not adopt extreme measures we will have to revert to planned blackouts affecting the population," said a recently circulated message from the Council of Ministers. "Company directors will analyze the activities that will be stopped and others reduced, leaving only those that guarantee exports, substitution of imports and basic services for the population," according to another distributed by the light industry sector. President Raul Castro is said to be intent on not repeating the experience of the 1990s, when the demise of the Soviet Union and the loss of its steady oil supply caused frequent electricity blackouts and hardship for the Cuban public. The directives follow government warnings in the summer that too much energy was being used and blackouts would follow if consumption was not reduced. All provincial governments and most state-run offices and factories, which encompasses 90 percent of Cuba's economic activity, were ordered in June to reduce energy use by a minimum of 12 percent or face mandatory electricity cuts. The measures appeared to resolve the crisis as state-run press published stories about the amount of energy that had been saved and the dire warnings died down. The only explanation given for the earlier warnings was that Cuba was consuming more fuel than the government had money to pay for. The situation is not as dire as in the 1990s because Cuba receives 93,000 barrels per day of crude oil, almost two-thirds of what it consumes, from Venezuela. It pays for the oil by providing its energy-rich ally with medical personnel and other professionals. Cuba has been grappling with the global economic downturn, which has slashed revenues from key exports, dried up credit and reduced foreign investment. The communist-run Caribbean nation also faces stiff U.S. sanctions that include cutting access to international lending institutions, and it is still rebuilding from last year's trio of hurricanes that caused an estimated $10 billion in damages. In response, the government has cut spending, slashed imports, suspended many debt payments and frozen bank accounts of foreign businesses. It reported last week that trade was down 36 percent so far this year due mainly to a more than 30 percent reduction in imports.