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Oil industry shows interest in warming up ties to Cuba

What with full patdowns for Cuba travelers at U.S. airports, continued Bush-era regime-change programs, and Havana arresting a USAID subcontractor, it's Ice Age 3 in U.S.-Cuba relations.

But a very powerful player is beginning to increase the heat: Big Oil.

Very quietly, Sens. Mary Landrieu, D-La., and Lisa Murkowski, R-Alaska, inserted oil exemption wording into a Senate bill last year — and now an oil industry association has gone on the record to say it prompted the move.

The bill (S 1517) mainly deals with increased federal oil revenue sharing for Gulf of Mexico states. It includes a section toward the end that would allow U.S. citizens and residents to "engage in any transaction necessary" for oil and gas exploration and extraction in Cuba — "notwithstanding any other provision of law." For that purpose, the bill would amend the Trade Sanctions Reform and Export Enhancement Act of 2000, allowing oil industry employees to travel to Cuba without having to apply for a specific license with the Treasury Department.

The bill is pending before the Senate Committee on Energy and Natural Resources. With senators such as Bob Menendez, D-N.J., and George LeMieux, R-Fla., determined to defend the embargo tooth and claw, the bill is facing a tough fight. Even so, the bill is remarkable because it embodies the first Cuba-related move on Capitol Hill by the U.S. oil industry.

Platts Oilgram News reported that the Petroleum Equipment Suppliers Association encouraged Landrieu to insert the two Cuba sections. A vice president of Halliburton, who heads the Petroleum Equipment Suppliers Association's government affairs, told Platts the trade organization is very interested to "address current Cuba policy."

These are remarkable words. The industry has come out of the Cuba closet.

• • •

Yes, cash crunch is the topic du jour in Cuba — but at the same time, business opportunities are opening up for astute and long term-minded players. Thanks to the trade and integration agreement between eight primarily left-populist Caribbean and Latin American countries, Cuba is becoming a springboard to other markets, and a handful of Asian and European companies are taking the plunge.

Cuban-Venezuelan teams recently have installed more than 300 generators made by Germany's MTU Onsite Energy in Venezuela, for instance. Even more interesting is the case of Spanish generator manufacturer Guascor SA, which set up a joint venture in Cuba last year. Generación Caribe (Gecar) — 70 percent controlled by a subsidiary of state utility Unión Nacional Eléctrica — maintains Guascor generators installed by Cuban engineers in third countries.

What Guascor and MTU are piggybacking on is this: Cuba is exporting its "energy revolution," and with it hundreds of millions of dollars worth of equipment. In an effort to help the South American country get rid of rolling blackouts, the island has recently supplied partner Venezuela with 43 small diesel power plants (each consisting of multiple generators), and Cuba is in the process of providing 30 more over the next two months.

Cuba addressed its problem with rolling blackouts in the early 2000s as its aging electrical system began to break down. Fidel Castro resisted spending billions on thermoelectric power plans, choosing to save time and money with a decentralized system of thousands of diesel and fuel-oil generators scattered around the island. Within a matter of a few months, the blackouts disappeared.

Cuba is now propagating its distributed power generation concept as a model for fellow ALBA member countries and other developing nations. Beyond Venezuela, Cuba already provided seven mini-power plants to Nicaragua, and one 60-mw power plant to Haiti. Cuban electric engineering teams are also working in Ecuador and Equatorial Guinea in Africa.

Competitors Hyundai and MAN B&W likely will become more proactive as the Cuban model gets replicated by more developing nations. But one name will be missing from that business opportunity: Caterpillar Corp.

• • •

Crisis also means opportunity: The earthquake in Haiti is helping thaw some ice between the United States and Cuba.

As a starter, on the night of the earthquake, Castro wrote in a column that Cuba was willing to "cooperate with any other state." Cuba, which has 400 doctors deployed in Haiti, is allowing U.S. relief planes to overfly its territory.

And here is how State Department spokesman Charles Luoma-Overstreet answered the question of an Italian correspondent whether it is "possible to imagine" U.S.-Cuban cooperation over Haiti:

"Absolutely. This is an effort that goes beyond politics. We're interested in addressing the dire humanitarian needs on the spot right now. I can't speak to precisely the level of resources that the Cuban government is bringing into Haiti, but to the extent they are there, we are certainly going to talk and collaborate and work to see that people are helped there. I know the Cubans have given us specific authorization already to be using Guantanamo as a staging point coming into Haiti. That's a sign of the close cooperation we're doing to put politics aside and address the humanitarian needs here."

Meanwhile, a Reagan administration assistant defense secretary is dreaming of the ideal disaster response combination: U.S. helicopters and Cuban doctors.

"We should stop and think that Cuba right next door has some of the best doctors in the world," says Lawrence Korb, now an analyst at the Center for American Progress in Washington. "We should see about flying them in."

Norway is showing another option. On Jan. 25, the Norwegian ambassador in Havana handed the Cuban government a check for 5 million kroner ($880,000) to support the Cuban medical effort in Haiti. This is not only a big compliment to the Cubans, but it makes a lot of financial sense because the small Scandinavian country would have to spend tens of millions of dollars to have the same positive impact on Haiti if it were to go alone.

Food for thought.

Johannes Werner is editor of Cuba Trade & Investment News, a monthly newsletter, and Cuba Standard, a Web site featuring real-time news about the Cuban economy. He can be reached at jwerner@cubatradenews.com.

Oil industry shows interest in warming up ties to Cuba 01/30/10 [Last modified: Friday, January 29, 2010 8:08pm]

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