To avoid another energy crisis, Cuba looks offshore for resources

Magdalena Fontana, 31, loads her new refrigerator in her Havana apartment. Tens of thousands of Cubans are getting new energy-efficient refrigerators to replace the old models. They also were given millions of energy-saving lightbulbs.

LARA CERRI | Times

Magdalena Fontana, 31, loads her new refrigerator in her Havana apartment. Tens of thousands of Cubans are getting new energy-efficient refrigerators to replace the old models. They also were given millions of energy-saving lightbulbs.

QUIVICAN, Cuba — During the sweltering summer of 2005, residents of this rural town an hour south of Havana were driven from their beds to escape the heat.

Without electricity for fans or air conditioning, they slept on porches, in back yards, even on the bandstand in the central plaza.

Maintenance problems at two of the island's aging thermoelectric power plants were blamed for rolling blackouts that swept across the country. Factories shut down and food rotted in fridges. Frustration boiled over into minor outbreaks of civil unrest with even the occasional cry of "Down with Fidel" heard along unlit streets.

"That summer was terrible," said Reynaldo Fernandez, 92, sitting in the plaza with friends on a recent cool morning. "But everything is fine now. I can't remember when the last power cut was."

The solution, albeit short-term, was a generous infusion of cheap oil from Venezuela and the purchase of hundreds of box car-sized generators, like the ones inside the guarded compound on the outskirts of Quivican.

"This has provided Cuba with a buffer against its oil reality," said Jonathan Benjamin-Alvarado, a Cuba expert with the University of Nebraska at Omaha, who has studied the island's energy system for two decades. "But energy is and remains the Achilles' heel of the Cuban economy."

Acutely aware of that, Cuba hopes to tap huge oil reserves off its north coast. It's a prospect that could transform its economy, making the island energy independent. But it makes some Florida politicians shudder.

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Critics called the hulking generators, which cost a hefty $800-million, a "Home Depot solution," noting that they are versatile, but not energy efficient.

Fidel Castro wasn't satisfied either, apparently. In January 2006, six months before he stepped aside because of illness, Castro launched what he called an "energy revolution."

He wanted to cut energy spending by $1-billion a year. Old power plants would go in favor of more modern heat-efficient technology.

"Thermoelectric plants are prehistoric," Castro said in a TV broadcast, which had to be postponed a day due to a blackout.

Measures to improve conservation were announced, including the free distribution of millions of energy-saving fluorescent lightbulbs, and the introduction of energy-efficient domestic appliances imported from China to replace 1950s-era stoves and fridges. Cuba also cracked down on graft at gas stations where rampant theft fed a black market.

Early in 2006, Castro explained his plan to a delegation of U.S. energy specialists in Havana. He had prepared charts and tables to show how his new energy revolution was affecting peak energy use.

"It looked like back-of-the-envelope kind of scribbling," said Benjamin-Alvarado, who attended the briefing, "but he was very articulate."

Ordinary Cubans welcomed the new appliances, though enthusiasm dampened when electricity subsidies were cut and prices shot up 300 percent.

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Thanks to a joint venture with Canadian company Sherritt, Cuba produces a growing share of its electricity from natural gas.

More than a third of Cuba's oil comes from onshore wells that pump about 51,000 barrels per day. The island receives 94,000 barrels daily from its socialist ally Venezuela, worth an estimated $2.5-billion.

Cuba's onshore oil is heavy, sulphurous crude that makes poor fuel. But farther offshore, just 50 miles from the Florida Keys, is a potential treasure trove of premium grade oil.

The U.S. Geological Survey estimates Cuba's offshore reserves hold from 5-billion to 9-billion barrels of oil, and close to 1-trillion cubic feet of natural gas.

"This is the big bonanza," said Jorge Pinon, a Cuban-American energy expert and former president of Amoco's oil operations in Latin America. "This could transform Cuba's energy security, turning it into a petroleum exporter even."

No offshore oil has been recovered yet, but a dozen foreign companies from China, Spain, India, Norway, Vietnam, Canada and Venezuela have signed exploration contracts.

Despite Cuba's socialist economic model, its oil production sharing agreement is "very commercial," says Pinon. The contracts allow for companies to recover their investments quickly. "I have been in the business for 30 years, and I don't think I have seen any oil company that will not sign this agreement."

But it could be years before Cuba recovers any offshore oil, due to a lack of available drilling platforms, equipment and skilled labor. Cuba's access to the latest technology is limited by the 40-year-old U.S. economic embargo. "They will have to rely on second- and third-generation technology," said Benjamin-Alvarado. "That raises the costs."

• • •

Exploratory drilling is expected later this year, but it could take three to five years to develop the first wells, Pinon estimates.

Cuba appears confident oil will flow one day. A deep sea terminal for supertankers is planned for the northern port of Matanzas. Officials plan to upgrade a 116-mile pipeline across the island to a Soviet-built refinery that Venezuela recently refurbished.

Drilling for oil so close to Florida's beaches is strongly opposed by members of Florida's congressional delegation.

"If there were an oil spill it would have a catastrophic effect on the environment," said Sen. Bill Nelson, a Democrat, noting that the Gulf Stream could carry spilled oil as far as Fort Pierce.

Nelson has proposed legislation to prevent the Bush administration from renewing a 1977 international agreement that allows Cuba to conduct commercial activity near the Keys.

But the United States may be on weak ground since the agreement abides by international maritime law. In which case, Fidel Castro's "energy revolution" would be assured.

David Adams can be reached at dadams@sptimes.com.

To avoid another energy crisis, Cuba looks offshore for resources 03/14/08 [Last modified: Monday, March 17, 2008 1:52pm]

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