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Friday, January 2, 2015

Cuban Oil

As always, we continue to look at natural gas mostly, some oil, as a bridge to fully moving to full clean energy sources (though, we'd love to see continued improvement in reducing emissions from fossil fuel as work through this migration), and the world is finding, as we see here, new sources of supplies.

The US energy program would diversify again if we imported fossil fuel in from Cuba.  The transmission/transportation would come with less burden than our current sources, other than domestic.  If, in fact, the world economy will continue to grow on a balanced basis, and the US can put aside political differences to trade with Cuba, this could be a win-win.

You must always question, of course, as we've seen worldwide, including spills in the Gulf, the industries ability to drill without environmental damage.

We wonder, and the picture below is beautiful, if those oil rigs will someday be replaced by wind turbines.

Cuban Oil May Prove A Boon For U.S. Companies


With diplomatic relations warming between the U.S. and Cuba, oil and gas companies may train their sights on what’s off Cuba’s coast — large oil reserves. Right now Cuba produces just over 50,000 barrels per day of oil and relies on Venezuela for around another 100,000 bpd. However with Venezuela’s economy reeling from the staggering drop in oil prices this year, Cuban officials want to avoid the impacts of a sudden drop in Venezuelan support. The commitment by Cuba and the U.S. to normalize relations may allow Cuba to buy more oil on the open market, and for U.S. companies to bring expertise and experience to tap into the country’s offshore reserves.

This outcome is far from certain. With Saudi Arabia refusing to cut oil output, which would stabilize prices, and previous offshore efforts yielding unsuccessful results, many experts believe that most of Cuba’s 124 million barrels will remain inaccessible. Brazilian, Malaysian and Spanish companies have failed to produce any major wells during exploration efforts in the last few years. Pavel Molchanov, an energy company analyst with Raymond James, told Politico that there is “not going to be a Cuban oil rush.”

Even if there is no rush, the arrival of U.S. oil and gas firms could help boost production through better drilling services. Jorge PiƱon, director of the Latin America and Caribbean Energy Program at the University of Texas, told FuelFix that if companies like Halliburton and Schlumberger gave technological assistance to Cuba, the country could significantly increase the amount of oil it recovers from its current wells. He also said that Cuba wants to avoid the type of economic pain it experienced after foreign aid dried up along with the fall of the Soviet Union — something that could foreseeably happen with Venezuela if oil prices don’t rebound.

With a major leap into Cuban oil looking doubtful for economic and geologic reasons, one actual benefit that may be more likely is an increase in safety measures and precautions for the drilling and refining that does take place — including responses to any spills. Cuba borders the Gulf of Mexico to the southeast, and is susceptible to offshore disasters like the 2010 Deepwater Horizon explosion near the U.S. coast. Spill containment equipment developed to deal with Deepwater Horizon-type events will likely be held up by the current embargo because the products are produced by U.S. firms. The U.S. embargo of Cuba remains in place as Obama needs the Republican-controlled Congress to help him in normalizing these economic relations. As it stands, anything made from more than 10 percent U.S. parts cannot be sold to Cuba or a Cuban contractor.

As these economic barriers and incentives play out, the U.S., Cuba, and Mexico will have to determine how to divide up the Gulf of Mexico.

“Previous agreements between the United States and Cuba delimit the maritime space between the two countries within 200 nautical miles from shore,” the White House said in a release. “The United States, Cuba and Mexico have extended continental shelf in an area within the Gulf of Mexico where the three countries have not yet delimited any boundaries.”

The Cuban government is also looking to diversify its energy sources, and increase renewable energy capacity in an effort to improve energy security. Based primarily on solar, wind, and small hydropower, Cuba aims to get 24 percent of its electricity from renewable sources by 2030. Cuba opened its first solar farm in 2013 and has plans for at least six more.

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