U.S.-Cuba Security Cooperation - World Security Institute

Consumption and Production:

Oil consumption: 209,000 barrels/day (2006)
Domestic production: 76,000 barrels/day (2006)
Imported oil: Approx. 144,000 barrels/day
From Venezuela: Approx. 90,000 barrels/day

Domestic oil production has increased seven-fold since 1995, but Cuba still produces slightly less than half of what it consumes, and most of its production is low-quality heavy crude. Under a cooperation agreement initiated in 2000, Cuba imports more than half its oil from Venezuela. In exchange more than 20,000 Cuban doctors are providing medical service in Venezuela. Cuba has proven reserves of 750 million barrels of oil and 2500 billion cubic feet of natural gas; however, an estimated 100 million barrels have been discovered in reserves in the Matanzas area and the potential for an estimated 1.6 billion barrels of oil in reserve exists in the basins of the Gulf of Mexico. Nonetheless, Cuba's main oil field, Varadero, has been active for nearly 40 years, and is begining to dry up.

"Energy Revolution": A Response to Cuba's Energy Problems: Chronic blackouts and decaying energy infrastructure led Fidel Castro to declare an "energy revolution" on January 17, 2006. Through a combination of stringent conservation, increased efficiency, price hikes on electricity to household consumers, new generating plants, and recent oil and gas discoveries, Cuba is seeking to improve its energy situation. At the direction of government workers, many households are replacing old, inefficient appliances with energy-saving fans, rice cookers, and refrigerators. Smaller electric generating plants are also gradually being built throughout Cuba, supplanting large old power plants that have suffered chronic breakdowns due to years of operation on heavy Cuban oil.

Foreign Investment in Cuban Oil Discoveries: Offshore oil field discoveries in the Gulf of Mexico surrounding northwestern Cuba have prompted numerous foreign countries to invest in Cuba; already France, Canada, India, Spain, Norway, Venezuela, Brazil, and China have established drilling contracts with Cuba's state oil company CUPET. Cuba has encouraged and passed laws in favor of this foreign investment, offering flexible terms and other benefits to participating countries. These offers do not exclude the United States. Additionally, Cuba has the potential for onshore hydrocarbon fields and is searching for more offshore oil fields in the Gulf of Mexico.

US Interest and Legislation for Cuban Energy: Because of the embargo, US oil companies are prohibited from investing in offshore drilling contracts. However, many companies, such as Marathon Oil, Exxon Mobil, and Chevron, are advocating for an exception to the embargo's limitations, touting the benefits the US would gain from participating. Drilling, proponents argue, would help alleviate the world's demand for oil and for rising oil prices, and would also allow the US to have a share in the profits and compete with the other countries involved. Members of Congress are divided. Some, such as Sen. Larry Craig (R-ID), have offered bills to exempt energy from the embargo. Others, such as Sen. Mel Martinez (D-FL), oppose any offshore drilling in the region on the grounds that it could endanger the ecosystem and the tourism industry in Key West. These opponents to drilling, such as Rep. Ileana Ros-Lehtinen (R-FL), are in favor of laws that would impede Cuba's drilling efforts by punishing those countries that participate in the drilling venture or contribute money to Cuba's drilling development and research.

Cuba's overall energy infrastructure – from refineries to power-generating plants to electrical grids to local wiring – is in an advanced state of decay, and will require significant investment to upgrade. Although American companies are currently precluded from involvement by U.S. law, they would seem the logical choice for upgrading Cuba's power grid.

Hurricane Damage: Because of Cuba's location in the Gulf of Mexico, it has suffered damage from 16 different hurricanes over the past 15 years. In 2005, Hurricane Dennis wreaked havoc with Cuba's energy infrastructure. Cuba's electrical grid crosses the length of the island from east to west, but hurricanes usually come in a south-north direction. In 2004 Hurricane Charley cut the electric grid in half and left residents of the western Pinar del Rio province without power for two weeks. Improving the quality of Cuba's energy infrastructure would minimize such devastating consequences to Cuba's energy systems.