Is A Russia-Cuba Energy Deal In The Works?

The chief executive of Russian state oil major Rosneft met yesterday with Cuba’s President Raul Castro, suggesting that the two are working on an energy deal, Reuters reports.

Rosneft started exporting crude oil to the Caribbean island earlier this year as its main supplier, Venezuela, struggled with a decline in its own production, and in October Sechin said there were plans to increase oil shipments to Cuba.

Rosneft also plans to invest in refining in Cuba, it became clear after a meeting between Sechin and Cuba’s Energy Minister Alfredo Lopez. More specifically, the company will take part in the modernization of the Cienfuegos refinery—a joint venture between Cupet and PDVSA that last week became officially fully Cuban.

PDVSA held 49 percent in the refinery, and according to a former government official from the South American country, Cuba took over the stake as payment for debts that had been incurred from tanker rentals and professional services.

The refinery has a daily capacity of 65,000 barrels of crude, but in August this year it only processed about 24,000 bpd, the Cuban daily said. What’s more, Venezuela’s oil industry troubles led to a change in the grades it sent to Cienfuegos to heavier ones that are more difficult to process.

Related: Yuan-Priced Crude Futures Could Arrive Before Christmas

Cuba has been dependent on Venezuelan oil imports for as much as 70 percent of its domestic energy needs, but with Venezuelan production falling, the island has turned to alternative suppliers. It also has plans to develop its own oil and gas resources.

There are few foreign energy companies operating in Cuba, but one of these, Australian Melbana Energy, has set its sights on an onshore deposit dubbed Block 9, which, according to the company, could have reserves of between 1.18 billion and over 44 billion barrels of oil, with the recoverable portion estimated at around 637 million barrels.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

• The 5 Oil Factors To Watch In 2018
• This OPEC Member Aims To Boost Oil Output By 40%
• Canadian Oil Prices Plunge To $30