Oil and gas companies investing in cuba
The period saw some 42 sale and purchase agreements SPAs signed with European and Asian entities — some of which are still active today, although most exhibited preference for stakes in proven blocks over new projects in order to lower exploration and cost-related risks.
The number of such deals have been declining since, due to limited commercial finds, global oil price volatility and other external factors including diplomatic tensions with the US and the Covid pandemic. Cuba for its part has continued to work to revive interest in its oil and gas sector. In , launched the first licensing round offering 24 blocks in the EEZ. License awards had initially been slated to occur in July but appears to have been delayed due to the Covid pandemic.
In fact, Block 9 marks its first foray into hydrocarbon projects in Cuba, although the firm does have experiences partnering larger firms in a number of high-risk upstream plays across Asia including those in Australia, Indonesia, Timor-Leste and Thailand. In addition, there are significant above-ground risk factors for investors to navigate.
The first is the lack of a standing petroleum law. There is a working structure in domestic oil and gas with CUPET partnering outside firms across the entire value chain, and the National Office of Mineral Resources NOMR serving as the designated authority for certifying and approving investments in oil and gas. A draft petroleum law had reportedly been submitted to the National Assembly for approval back in , although has yet to be adopted.
The Cuban government for its part continues to be open to foreign investors and CUPET has reassured investors that even if there are changes to regulations and licensing terms, terms agreed with foreign investors will remain in place. These have been sufficient for those more adventurous to make inroads into Cuba, although the lack of a formal law leaves lots of grey area and could deter firms that are more risk-averse and subject to shareholder scrutiny.
Source: Fitch Solutions The second is the lack of infrastructure development nationwide. Finding oil would not be the end in itself as firms must also be prepared to tackle the severe infrastructure deficit that pervades across the value chain. In the context of oil and gas, limited recent exploration means there is a lack of production for both onshore and offshore and transportation for distribution, refining and exports infrastructure that are needed to send supplies from project site to market.
The costs to address these up would likely need to be borne by the participating firms resulting in higher project cost and longer project lead time. Frequent power outages due to the decrepit state of power plants and grids, made more evident during the Covid pandemic, also bring significant operational risks particularly during peak demand periods while risking escalating popular discontent.
Nowadays, foreign companies interested in investing in the Cuban oil industry prefer to participate mostly in EOR operations since the exploratory risk is smaller and the zones where the crude oil exists are well identified and characterised. Table 1 outlines foreign investment opportunities in the Cuban oil industry.
If oil is found, it is estimated that companies would have to invest in developing production capacity for at least three to five years before production could begin. However, production could be delayed due to, mostly, availability of offshore oil field development services. Once oil production begins, it is expected to grow slowly. The main non-Cuban operator in Cuba is Sherritt International, a Toronto mining company which has been active in Cuba for more than 20 years. It has drilled eight wells, one more than required by the extension terms, and has ended the extension drilling programme.
Six of the wells produce oil, one is suspended, and one has been abandoned. Some studies have concluded that Cuba could produce enough oil in the future to become an oil exporter, but there are some uncertainties that still need to be considered first in order to support this conclusion. First, there are tangible reservations regarding when oil production will start and at what rate it could be obtained.
Thirdly, oil demand is expected to grow in the near future, taking into account growth in sectors such as construction, tourism and industry. In this case, Cuba is still likely to trade more oil — especially as refining capacity increases — but its net trade balance in oil may not necessarily shift to a significant oil export surplus. All will depend only on how much oil is found and developed, and what will happen with domestic Cuban demand. How oil is extracted in Cuba Cuba has the second largest proven hydrocarbon reserves in the Caribbean area, surpassed only by those of Trinidad and Tobago.
The block located along the Cuban northern coast is believed to hold material barrels of oil below ground, being near known oil fields such as Motembo, Santa Cruz and Varadero.
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| Oil and gas companies investing in cuba | Much of its recent leadership — former CEO Armando Olivera, at least four current or former vice presidents, and several senior engineers — were born in Cuba. The first business contract related to oil extraction operations between the Cuban government and a foreign firm was signed inin order to exploit the oil wells located at Block III south of Varadero beach. Here is MAY CEO Robert Zammit speaking with Proactive Investors about its operations: Its Block 9 Cuba oil play is the main game for MAY, particularly over the next 12 months where an extensive exploration campaign could result in a substantial increase in its resources which would drive up its asset valuation and in turn potentially its share price. Libya is yet to send oil to Cuba but Benjamin-Alvarado believes Libya will help Cuba in the short-term. The subsequent phases are expected to comprise of drilling wells. |
| Connell investing stitch | Then ina more comprehensive foreign investment law was enacted to further encourage foreign investment in Cuba. The barriers to such changes could take learn more here to fall. The number of such deals have been declining since, due to limited commercial finds, global oil price volatility and other external factors including diplomatic tensions with the US and the Covid pandemic. Bonuses are not paid upon signing, and taxes are levied by the National Tax Administration only on net annual earnings. Lopez said that in the field of offshore and land exploration, there have been positive experiences with foreign companies like Canada's Sherritt International, which recently signed a contract to explore five blocks of the island's northern oil belt, while Australia's Melbana Energy Limited opted for an extensive zone in western Cuba. In recent weeks, at its first opportunity to review early data products from the Beehive 3D Seismic Survey, management said that it is of excellent quality for this stage in the processing exercise. |
| Picking teams for march madness | In September, Reuters reported that Algeria planned to send an 80,t cargo of crude to Cuba in October. They encompass offshore oil exploration to natural gas turbines to electric infrastructure to solar panels to biofuels. While the exact terms of the deal are a mystery, Cuba supplies "an army" of medical doctors and other experts to Venezuela, said Jonathan Benjamin-Alvarado, a Cuba expert and political science professor at the University of Nebraska. Foreign participation, according to the CUPET official, is vital for Cuba's goal to achieve energy self-sufficiency in the coming years. The company entered Cuba in the early s and is invested in oil and gas, power generation, and nickel mining. |
| Oil and gas companies investing in cuba | LNG on the cheap and with low transport costs, but not as long as the embargo is in effect. In Cuba, the National Office of Mineral Resources NOMR is the government institution in charge of certifying and approving potential investment projects and investors in the oil industry. For the period toCUPET has conceived several ambitious plans and projects in order to enhance its profitability and productivity, as well as to develop its oil refining industry. It now produces around 20, barrels of heavy crude oil per day from onshore wells, some of which are directionally drilled past the shoreline. The company entered Cuba see more the early s and is invested in oil and gas, power generation, and nickel mining. |
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