In Spite Of Its Vast Oil Reserves, Cuba Fails To Woo Investors
By Julianne Geiger
Posted on Fri, 12 February 2016 18:15
With the end of the 54-year U.S. trade embargo on Cuba, and Cuban
government moves to encourage foreign investors, Cuba is a suddenly
attractive venue that is sitting on an estimated 4.6 billion barrels of
oil and promising tantalizingly low production costs that defy low oil
In December 2014, the U.S. lifted the trade embargo, and earlier that
year—banking on an end to the embargo—Cuba began to lay the foundation
for attracting foreign investment by offering corporate tax credits.
It sounds great—but there has been no rush onto this playing field.
Throughout last year, Cuba was busy trying to sell itself as the next
What it has to offer is total undiscovered technically recoverable
reserves of 4.6 billion barrels of crude oil, 9.8 trillion cubic feet of
natural gas and 900 million barrels of natural gas liquids, based on
2004 estimates by the United States Geological Survey (USGS). The
country has traditionally—and very steadily—produced about 50,000
barrels of liquids per day, most from the coastal reserve areas east of
But it’s not all about the reserves. It’s about past failures, an
anticipated investor-unfriendly environment, and a lack of oil and gas
Deepwater drilling hasn’t been successful. In the spring of 2015, Cuba
noted that it had billions of barrels of oil in its Gulf of Mexico
deepwaters, but there have been no commercial discoveries offshore as a
result of exploratory drilling by Spain’s Repsol and Russia’s
Zarubezhneft. So the promise now is being touted in the onshore and
shallow water arenas.
Infrastructure plans that would make oil and gas exploration and
production more feasible have languished in project purgatory. A 2010
bid won by China to build a refinery and upgrade a crude oil import
terminal has stalled. And a key pipeline hooking the Cienfuegos refinery
to the producing fields of Matanzas hasn’t been operable since the early
What is really keeping investors away is the fact that Cuba has made it
clear that while there is the potential for joint ventures in
exploration and production, this will be a state-run game for the most
part. Any major deal will have majority Cuban ownership.
Independent MEO Australia oil company may disagree, because it’s moving
in on Cuba’s Block 9, where oil has been recovered in the past, certain
that there is a potential for “significant onshore prospects”, according
to UPI. But it’s basing that on wells drilled from the 1970s to the
But MEO Australia is the exception rather than the rule.
Operating costs as low as $9 per barrel have MEO convinced that this is
the one of the best new venues to play. And while those are impressive
operating costs when oil is just under $30 per barrel, it still hasn’t
been enough to prompt a rush on Cuba.
Embargo lifting doesn’t immediately teleport Cuba from the Cold War era
into the 21st century. Lifting the embargo is only the first of many
doors Cuba will have to pass through to make this a key venue for
foreign investors in oil and gas, and the question is whether Cuba—which
is desperate to develop its oil and gas—will be willing to shed some
state control to do so.
By Julianne Geiger of Oilprice.com
Source: In Spite Of Its Vast Oil Reserves, Cuba Fails To Woo Investors |