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Cuba oil shortage exacerbated by storm damage

25 Sep 2017, 1.15 pm GMT

Cuba oil shortage exacerbated by storm damage

Kingston, 25 September (Argus) — Hurricane damage to Cuba's tourism and agricultural sectors is sapping hard currency needed to buy oil after Venezuela slashed barter supply to its close political ally.

The two cash-generating sectors suffered "extensive and significant" damage from Hurricane Irma that passed off the northern coast on 8 September, Cuban officials say. Strong winds and heavy rain damaged hotel properties and several airports, thwarting commercial flights that bring in US tourists.

Sugar cane fields were flooded, diluting the sugar content of the cane, indicating reduced mill production this year, the government said.

"The impact of the hurricane is a setback not only for energy, but for the national economy that has been growing," an official of state-owned oil company Cupet told Argus on 22 September.

"Reduced income from sugar and tourism will affect all economic sectors, including fuel imports that must be paid for in cash."

Cuba's economy expanded by 1.1pc in first half 2017 despite a pervasive fuel shortage, economy minister Ricardo Cabrisas told parliament in July.

The tepid economic expansion reverses a decline of just under 1pc in 2016, which Cabrisas said in December 2016 was caused by "severe limitations" on fuel supply.

Venezuela's state-owned oil company PdV had traditionally supplied Cuba with around 100,000 b/d of crude and refined products under preferential terms based on an agreement signed in 2000.

The Venezuelan oil, officially delivered in exchange for Cuban medical, security and sports experts and products such as pharmaceuticals in lieu of cash, is a critical supplement to Cuban domestic oil production of around 50,000 b/d.

PdV´s steady decline in production capacity and its oil-backed loan commitments mainly to China have eroded supplies to Cuba, which received around 68,000 b/d of Venezuelan oil in first half 2017 from around 80,000 b/d as late as 2015, according to Cupet.

A shortage of foreign currency in Cuba has also impeded fuel imports, Cabrisas said in July.

Cuba now has to pay cash to import oil from other countries such as Russia, Iran, Algeria, Angola and Trinidad and Tobago to compensate for the reduced Venezuelan supplies, Cupet said.

The island's economy has also been set back by what state-owned power utility UNE says is "widespread" damage to transmission infrastructure and power plants.

UNE is restoring power in "isolated and unconnected" areas served by remote power generators, but the national grid will take "many months" to restore, the utility said.

Except for power plants in Santiago and Cienfuegos, most of the island's generators are located in the north that was most affected by Irma, UNE said.

Among the affected plants is oil-fired 330MW Antonio Guiteras in Matanzas on the northern coast that was flooded by seawater.

Another main source of Cuba's foreign currency – nickel production – was not significantly affected by the fierce hurricane, according to the government and Canadian producer Sherritt.

The hurricane caused "minimal damage" to the Pedro Soto Alba nickel processing plant in Moa. The plant is a 50:50 venture between Sherritt and state-owned Cubaniquel. Cupet confirmed Sherritt's statement that 506MW of capacity associated with joint venture Energas was not affected by the storm.

Sherritt, Cupet and UNE each have a one-third interest in Energas.


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