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CUBA
A life raft for Cuba?
Patricia Olguin
9/2/2004
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Oil discovery could have important political, economic impact on island.

The possibility of finding large quantities of light petroleum in deep waters off Cuba, where the Spanish-owned transnational Repsol-YPF is carrying out exploration, has raised questions about the impact such a discovery could have on the island that has resisted the stranglehold of a US trade embargo for more than four decades.

In early June, Repsol-YPF began to explore, in a very discreet manner, six of 59 blocks that resulted from Cuban authorities sub-dividing 112,000 square kilometers (43,240 square miles) in the Zone of Economic Exclusion in the Gulf of Mexico.

For exploration in the zone, Repsol-YPF rented the largest semi-submersible platform in the world, Eirik Raude, equipped with advanced technology and capable of exploring in deep and very deep waters.

After several weeks of drilling, chief operating officer of the firm Ramón Blanco announced the discovery of oil with a high, but not commercial, quality.

"The existence of an oil system has been confirmed. We have also been able to verify the presence of (crude) reserves of a high quality," Blanco said, according to press reports from Madrid.

After the announcement, the company said it would continue to explore in the zone, where company officials say there is sufficient potential.

Every night, in the northeast zone of Havana, the lights can be seen shining from the platform located some 30 km (18 miles) from the shore and where technicians are in a race against time to determine the real existence of light crude in areas where Cuba assumed sovereignty as part of the agreements signed 25 years ago between the United States and Mexico. At that time, the necessary technology did not exist to extract oil from deep waters.

Geologists from the company examined the area of the six Repsol-YPF blocks where they identified various structures similar to those that exist in Mexican waters of the Gulf of Mexico. The technicians drilled 3,500 meters (10,500 feet) deep in search of a deposit whose potential some estimate at the same level of the so-called Campeche Sound, where 2.6 million barrels of oil a day are extracted.

According to the US Geological Survey, a specialized US body, in this zone called the peripheral basin of northeastern Cuba, there could be reserves of between 480 million and 590 billion cubic feet of natural gas.

Nevertheless, a report by the British insurance company Lloyds Register estimated that an investment of US$1.5 billion would be needed to extract 150,000 barrels a day at this depth.

For Cuba, the discovery of light crude would be a lifesaver for an economy that is juggling the tight hold by the United States and the fall in international prices of its main export products such as sugar.

According to figures from the Ministry of Basic Industry, the island currently produces close to 4.3 million tonnes of very heavy crude which is rich in sulfur and is used to generate 83 percent of the country’s electricity.

Nevertheless, a good part of the fuel needs are covered with crude purchases of $1 billion, almost a third of the country’s import capacity, although it does receive 56,000 barrels a day at preferential prices thanks to an accord signed with the government of Venezuelan President Hugo Chávez.

Along with providing an economic edge, the discovery could be a political gold mine for the government of President Fidel Castro, who since last December extended an invitation to US oil companies to participate in his Zone of Exclusion "on the basis of mutual benefits."

"The discovery of oil in Cuba would shake up the trade embargo," said a Cuban academic who asked to remain anonymous.

The expert recalled that two months ago an important US oil company, Halliburton, in which current US Vice President Richard Cheney holds a high position, pronounced in favor of the lifting of sanctions against Libya, Iran and Cuba, arguing that other countries are gaining an advantage over their US counterparts.

The president of the US-Cuba Economic and Trade Council, John Kavulich — quoted by various international news media — said that "it would be difficult to imagine how the US oil industry would remain on the sidelines of a commercial discovery by Repsol," especially when some American food products worth approximately $600 million have been sold to the island in the last two years after the White House made a dispensation for exceptional trade with Havana.

Oil appears destined to become a permanent source of discord between Washington and Havana. When Castro’s guerrilla movement triumphed, differences arose when US refineries refused to process Soviet crude. Castro’s government responded with the nationalization of this industry and the White House counterattacked with the establishment of the economic blockade.

For this reason, many are carefully observing the evolution of events. Some political analysts consulted in private even say that Washington would not permit a socialist Cuba legitimized by top-level oil production. The ones who fear the worst even talk about the possibility of a "military solution," which would be greater with the re-election of President George W. Bush. Since last June 30 the Bush administration intensified the blockade by further restricting the dispatch of remittances and visits by Cuban emigrants to the island.


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