Although Cuba opened its petroleum industry to outside investment in 1991, it has gained its biggest momentum with the recent tendering of the deepwater blocks in the Gulf of Mexico, an area that is estimated to contain 3-4 billion barrels of recoverable crude reserves. The difficulty lies in the location of these blocks, with depths that range between 2,000 to 4,000 meters. The northernmost of the blocks that Cuba put up for tender lies south of three areas that the U.S. has put into contention for its own exploratory efforts in its section of the Gulf of Mexico. The westernmost Cuban blocks come close to the eastern of two “donut holes,” areas of disputed deepwater acreage. Foreign firms that have been exploring in Cuba in recent years include several small Canadian companies – Beau Canada Exploration, Perbercan, Cubacan and Alturas Resources -- U.K. firm Premier Oil, France’s Maurel & Prom and Sweden’s Taurus. Although French-Belgian giant TotalFinaElf stopped exploration in 1994 after drilling two dry wells, the company is believed to be in discussions with the Cuban government on natural gas and liquefied petroleum gas opportunities.

Since Moscow drastically cut economic assistance to Cuba as a result of the collapse of the former Soviet Union, the island state’s domestic consumption has dropped from a peak of about 245,000 b/d in 1987 to as low as 110,000 b/d before it recovered to current levels of about 190,000 b/d. Since 1998, Cuba’s crude production has slowly increased, from 38,500 b/d to 46,500 b/d in 2000. Roughly half of the crude production comes from Sherritt’s operations in the north central Varadero fields. The firm currently leads other foreign investors in production-sharing agreements, supplying capital, technology and know-how in exchange for 50% of output, which is subsequently sold to Cupet. Sherritt is also involved in a $150 million joint venture to process natural gas for electricity generation on the island.

The Cuban government has been working to upgrade its refining system to be able to accommodate a blend of imported and domestic crudes. The country has four refineries with nameplate capacity of about 301,000 b/d, with two units, one in Havana (122,000 b/d) and the other in Santiago de Cuba (100,000 b/d), accounting for the bulk of that capacity. A smaller refinery in the Ciego de Avila province produces about 2,000 b/d of lubricants for the local market.

The 76,000 b/d Russian-built Cienfuegos plant, designed in the early 1990s to handle Russian shipments, was not brought on stream due to the collapse in supplies from the former Soviet Union. An estimated $250 million is required to bring it into service. A number of foreign oil firms have been in on-again, off-again discussions with Cuba about establishing joint ventures to reactivate the unit.

Venezuelan state oil firm Petroleos de Venezuela S.A. (PDVSA) initiated discussions earlier this year to make a multi-million dollar investment in the unit to get the Cienfuegos refinery up and running but decided against the venture, reportedly on commercial grounds. The attempt was the second time PDVSA had looked at the investment opportunity and rejected it.

Other state oil firms, including Petrobras, Mexico’s Pemex and Colombia’s Ecopetrol have also been eyeing opportunities to invest in the plant. So far, nothing has come of the talks.

Over the past two years, Repsol YPF has tried to position itself to tap opportunities in the Cuban energy business to compliment planned exploration activities there as well as other investment positions elsewhere in the Caribbean and Latin America. Repsol YPF produces over 900,000 b/d in the Americas. At the end of 2000, the Spanish firm announced it would enter into joint venture activities with Cuba’s state-owned Union Cuba Petroleum (Cupet) in the areas of exploration, refining, petroleum products sales and distribution, LPG and natural gas marketing and power generation.

Biomass

Energy derived from biomass constitutes the largest potential renewable resource for Cuba, with sugar cane the most important source. The large share of the sugar economy in the global economy and the high traditional consumption of bagasse as a fuel in the Cuban sugar industry are the reasons for the high proportion of this solid renewable fuel in the national energy balance n nearly 30% in 1989, or 4 million tons of oil equivalent (toe).

This energy consumption of bagasses (the part of sugar cane or sugar beets left after the juice has been taken out: used for fuel and in the manufacture of insulation) traditionally takes place at low efficiency and in terms of electrical generation its transformation represents just 19-20 kilowatt hours per ton (Kwh/ton) of ground sugar cane, as a national average. To improve this efficiency is an obvious priority.

Sugar cane agricultural residues also constitute a considerable energy potential. The Cuban system of harvesting sugar cane, characterized by mechanized cutting and cleaning, in more than 900 regional centers, results in an annual harvest of the equivalent of 700,000 toe which were previously burned without any energy utilization.

The characteristic of low density, common to bagasse and most of the solid fuels coming from biomass, set certain economical conditions for their use, such as to be near where they are produced, or to compact them, in order to make economical its transportation.

Another important energy potential coming from biomass is the production of biogas. Its main sources are:

* Residues from sugar plants and from secondary sugar industries.

* Residues from confined livestock (cattle, pigs, and poultry).

* Residues from coffee harvest.

* Residues from other biomass processing industries (paper and food processing)

* Urban wastes, both liquid and solid.

Preliminary calculations show that the total production that could be reached, based on the digestion of the above residuals, could represent a potential of over 400 000 toe.

Recently the first industrial biogas plants went into operation in Cuba. This was built with a financial contribution from the Evangelical churches of Germany's Bread for the World, through the Cuban Ecumenical Council. At the same time, more small plants are being built to solve many local energy needs.

At present, work is focusing on the cleaning of biogas and on the compression of the resulting methane, with the aim of diversifying its applications.

The production of ethanol is presently limited to the production of alcohol for the liquor industry. The fermentation of sugar juices constitutes a considerable energy potential, but this would enter into competition with existing sugar production.

Wood and charcoal are traditionally used solid fuels. Annual wood production is around 2,5 million cubic meters. Annual charcoal production, approximately 80 000 t. This is an acceptable level taking into account the rate of re-growth. It should be mentioned that from the beginning of the Cuban Revolution in 1959, reforestation became an important task. The result has been that, over the past 24 years, Cuba is one of the few countries in the world that can exhibit a significant increase in its forest area, from 14% to 20%.