Pemex exploring compressed gas supply to Cuba

OREANDA-NEWS. January 21, 2016. Mexico is throwing its hat into the ring to supply natural gas to Cuba in the wake of Washington?s rapprochement with Havana.

Mexico's economy secretary Ildefonso Guajardo raised the possibility of state-run Pemex supplying Cuba during a Mexican conference last week. "It?s something we?re just starting to explore," he said.

In 2012, Mexico and Cuba signed a series of cooperation agreements, including the sharing of expertise, technology, best practices, training and renewable energy know-how.

The gas talks started during a visit to Mexico in November 2015 by Cuba's president Raul Castro.

Mexico has been importing growing volumes of shale gas from the neighboring US though an expanding network of pipelines. But Guajardo said the gas for Cuba would not necessarily come from the US.

Mexico is in the throes of opening its energy sector, a ground-breaking process that is expected to boost Mexico?s own domestic production as well.

Cuba is seeking to purchase gas "from several sources, including Mexico," to supply power plants to be developed "over the next three to four years," an official of the island's state-run oil company Cupet tells Argus. "The discussions are not yet at a stage where we can state actual volumes, but we know we will need the fuel for the power plants."

The discussions with Mexico are "in their early stages" and similar discussions are planned with other possible sources, the Cupet official said.

Major LNG exporter Qatar said in November 2015 it will invest \\$2bn over the next five years in a number of projects in Cuba, including some in the energy sector.

A number of small LNG projects in the US, which is just emerging as an LNG exporter, are also eyeing the wider Caribbean market where subsidized Venezuelan oil supply is seen as unsustainable.

Compressed gas could be a more viable near-term option for Cuba than LNG because it does not require as much import terminal infrastructure.

Cuba?s economy is expected to begin recovering slowly as the US eases some economic and political restrictions, even though an economic embargo remains in place and can only be lifted by the US congress. The US and Cuba restored diplomatic relations last year.

Cuba's state-run power utility UNE and Russian state-owned power company Inter Rao are developing 800MW of thermal generating capacity, the companies said in October 2015.

Cuba?s \\$1.6bn power development project involves three 200MW plants at the East Havana complex in the capital Havana, and a 200MW unit at the M?ximo Gomez complex in Mariel, 40km west of Havana.

Construction is scheduled to start by March, and a date for commissioning will be set once construction starts, the Cupet official said. "Our current gas production is inadequate to meet the needs of the power plants."

Cuba produces around 50,000 b/d of liquids and 20,000 b/d equivalent of gas from onshore and shallow water reservoirs. The island imports around 80,000 b/d of oil from Venezuela on preferential terms.

The domestic gas is used for power generation by the Energas consortium that is jointly owned by UNE, Cupet and Canada's Sherritt International.

Energas has 506MW of Cuba's total operational generating capacity that UNE puts at 3,680MW.

Sherritt is the only foreign investor in Cuba's power sector.

Cuba hopes to restart a stalled search for oil and gas in its waters in the Gulf of Mexico, Cupet said in 2015.