Cuba's energy crisis has eased "slightly" since the start of the year as increased oil supplies from new sources partially replace dwindling imports from political ally Venezuela, sources in Havana tell Argus.
But the island's new president, to be formally named today following nominal elections, will face a challenge in meeting cash payments for the imports from some of the fresh sources, including Angola, Algeria, Russia, Iran, and Trinidad and Tobago.
The island's foreign earnings are now heavily dependent on tourism in light of flat performances by its sugar and nickel export operations. At the same time, increases in commodity prices have forced the government to use more of its scarce hard currency for food imports.
Despite the new oil supplies, the island is still suffering from shortages of refined products such as gasoline, and inadequate fuel for power plants has sparked persistent blackouts.
The country needs "about" 20,000 b/d more to meet demand and stabilize the sector, one official of state-owned oil company Cupet says.
"As long as this deficit remains, we will have shortages of some products, and we will have to rotate fuel for power plants. But we hope to meet all local demand by the end of this year with the conclusion of a major supply agreement," the official said.
The official declined to name potential suppliers citing the confidential nature of the negotiations.
The island's crude and products deficit "is about 26,000 b/d," Cupet told Argus in March. Cupet had pegged the deficit at 30,000 b/d in December 2017.
Venezuelan state-owned oil company PdV had traditionally supplied Cuba with 100,000-110,000 b/d of crude and products under preferential terms agreed in 2000.
But PdV´s tumbling oil production and its oil-backed loan commitments, mainly to China and more recently Russia, have significantly cut supplies to Cuba, and all but wiped out supply to other countries that are members of Venezuela's PetroCaribe subsidized oil program launched in 2005.
To the extent that Venezuela still manages to eke out supply to Cuba, PdV uses some of the crude it obtains through barter arrangements, sometimes transshipping cargoes such as Russian Urals through the Dutch-controlled island of Curacao where PdV leases a refinery and storage terminal.
"Venezuela is still an important but much smaller source" of oil, one official said.
Cuba pays for the Venezuelan oil through the dispatch of medical and security personnel and other services. Venezuelan opposition groups have long denounced the arrangement as a "giveaway" of Venezuelan oil. Some 30,000 Cubans are believed to be deployed in Venezuela.
Cuba is using the same method to pay for current imports from Algeria's state-owned Sonatrach, the sources say.
But it is not known whether the island will be required to pay cash when it takes delivery of unspecified volumes of Algerian crude and products under a new 2019-21 supply agreement.
Cupet says the terms of these new oil deals are negotiated by the island's foreign trade ministry which has not responded to a request for details.
Russian state-controlled Rosneft has also been supplying Cuba. A December 2017 visit to Havana by Rosneft chief executive Igor Sechin is expected to lead to a broader supply deal.
The modest uptick in oil supply is boosting throughput at Cuba's 65,000 b/d Soviet-era Cienfuegos refinery that had been running Venezuelan crude, Cupet said.
The refinery is currently operated by Cupet after the collapse of a joint venture with PdV late last year.
Throughput has improved from a 2017 average 24,000 b/d, but Cupet officials declined to specify the current level.
Cuba's domestic crude and natural gas production was targeted to reach 3.64mn tons (68,000 b/d of oil equivalent) in 2017, but fell slightly short by an estimated 38,000 tons, according to a December 2017 government report on the island's economy.
The prospects for reviving stagnant domestic output dimmed in 2012 after foreign companies, including Spain's Repsol, India's ONGC, Norway's Statoil, Malaysia's Petronas, Russia's Gazpromneft and PdV found no commercial deposits in a deepwater exploration campaign.
Cupet had said in June 2016 that offshore exploration would restart in early 2017, then postponed the program to the end of 2017. The company had said in December 2016 that it had contracted Chinese geophysicist BGP Marine to shoot 25,000km of 2D seismic off the northwest, west and southwest of the island. It is not clear if this work was carried out.
The gradual improvement in the island's energy balance coincides with a presidential transition from 86-year-old Raul Castro to vice president Miguel Diaz-Canel. This will be the first time since 1976, when Raul's brother Fidel Castro replaced Osvaldo Dorticos, that the presidency will not be held by a Castro. But as prime minister between the 1959 revolution and 1976, Fidel effectively ran the country for five decades.
This week's presidential transition will not diminish the Communist party's 59-year control of Cuba´s government and most aspects of life on the Caribbean island. Raul Castro will remain in the influential post of first secretary of the Communist party.
