Cuba to seek oil imports from Russia, Iran

OREANDA-NEWS. September 07, 2016. Cuba is looking to Russia and Iran to make up for dwindling oil supplies from close ally Venezuela.

The island is keen to replenish oil supplies as it works to revive foreign tourism following the recent resumption of commercial flights from the US.

An official of Cuba's state-run oil company Cupet tells Argus that the Cuban government is preparing to start negotiations with Russia for the supply of crude and refined oil products "to counter possible disruptions in imports from current sources."

Cuba also plans to discuss oil supply with Iran, the official said.

Havana currently relies on Venezuela for crude and products which are effectively supplied for free. Under the formal terms of the preferential arrangement dating back to 2000, Venezuelan state-owned oil company PdV supplies the oil in exchange for Cuba's deployment of experts in the fields of medicine, security, sports and other areas. Cuba quietly resells part of the crude for cash.

Cuba's president Raul Castro told parliament on 8 July 2016 that the island's economy is under "stress" because of diminishing Venezuelan oil supplies "despite the firm will of President Nicolas Maduro and his government to fulfill these supplies."

Venezuela had been supplying around 80,000 b/d of oil to Cuba in 2015. More recent data is unavailable.

The likely quantities to be imported from Russia "will be the subject of the planned negotiations," the Cupet official said, adding that the foreign affairs and foreign trade ministries are carrying out the discussions with Moscow.

Cuba's foreign affairs ministry has not responded to a request from Argus for details.

Moscow had been the prevailing source of Cuba's oil imports until the collapse of the Soviet Union in 1991. Under that arrangement, Cuba bartered sugar for the oil.

An oil supply agreement with Russia "will be based on Cuba paying cash for the imports," the Cupet official said.

The Venezuelan supply supplements around 50,000 b/d of liquids and 20,000 b/d equivalent of gas that Cuba produces from onshore and shallow water reservoirs.

"There is uncertainty about the political and economic situation in our traditional source of oil, and the government's intention is to diversify sources so the country is not dependent on one source," the Cupet official said.

Cuba implemented an indefinite 50pc reduction in power and fuel use by state agencies, the government said on 6 July. The cutbacks are intended "to avoid blackouts and problems for basic services," then economy minister Marino Murillo said.

Iran and Cuba discussed cooperation in several areas including oil supply during a visit to Havana last month by foreign minister Mohammad Javad Zarif, an official Cuban government statement said at the time.

"There are no discussions yet about oil imports from Iran," the Cupet official said.

Cuba has been trying to restart deepwater oil drilling in the Gulf of Mexico that ran aground in 2012 after foreign companies, including Spain's Repsol, India's ONGC, Norway's Statoil, Malaysia's Petronas, Russia's Gazpromneft and PdV, struck dry holes.

In Venezuela, PdV's crude production is declining because of a lack of investment, services and functional equipment.