Petroleum in Cuba: Current Situation and Mid-Term Outlook

By Gustavo Coronel | January 18, 2011

Cuba currently produces about 48,000 barrels of oil per day and receives about 98,000 barrels per day of highly subsidized oil from Venezuela. This combined supply most probably exceeds demand by about 30,000 barrels per day. It is likely, therefore, that some of the oil received from Venezuela is being re-exported, giving the Cuban government an income of some $800 million per year. This amount would be in addition to the existing subsidy built into the Venezuelan oil supply contract that amounts to some $2 billion per year.

Oil companies present in Cuba

There are several oil companies present in Cuba. The most active is Sherritt International, a Canadian company, which produces about 22,000 barrels per day of oil under a contract that gives them 49 percent of the production, while the other 51 percent goes to the government. Other companies such as Repsol, Statoil, Petrobras, Petronas, PetroVietnam, Angola Oil Co. and Petroleos de Venezuela have a presence in Cuba but have no established production. A consortium made up of Repsol, Norway’s Statoil and the Indian Oil and Natural Gas Company is getting ready to explore in deep offshore waters and has contracted the rig Scarabeo 9 for $400,000 a day, with a crew of about 200, to conduct exploration drilling starting in 2011. However, this Chinese-built rig will no longer be arriving in the first quarter of 2011, as originally planned. Construction has been delayed and the rig is now expected to arrive in Cuban waters in June or, even, July of this year. After the consortium drills two wells the rig would be taken over by Petronas, the Malaysian state oil company, to conduct further exploration in another offshore block.

Cuban oil prospects

The prospects for Cuban oil resources are essentially located offshore. Although Cuban authorities mention possible resources of up to 20 billion barrels of oil, the only known geological appraisal of the area, made by the U.S. Geological Survey, indicated that there might be a 50 percent probability of some 4.6 billion barrels of oil to be discovered. A 50 percent probability of this amount being present means that the most probable amount to be found in Cuban offshore waters will be in the order of 2.3 billion barrels. Such an estimate represents oil in place. The lighter the oil to be found, the better the probabilities of a high recovery factor. Depending on the production mechanism present in the reservoirs, if oils are light, a recovery rate of up to 50 percent would be possible. Assuming this most favorable recovery factor, the most probable expectations for total oil production from the Cuban offshore would be in the order of 1.1-1.2 billion barrels.

Oil production levels that could be reasonably expected

A recovery of such an estimated volume would have to take place in about 30 years, depending on the number of companies involved, the characteristics of the reservoirs to be found and the technical complexity of the activity. Deep water drilling will be both expensive and time consuming. A 5-8 years period of exploration and a similar period of oil field development would most probably be required, in order to establish continuous production, probably reaching maximum production levels after some 15 years of the initial discovery wells. A reasonable average production from the Cuban offshore would likely be of some 120,000 barrels per day during the 30–year life of the fields. Production levels would be lower for the first 15 years, with maximum levels of 200,000 barrels per day achieved between year 15 and year 20, starting to decline afterwards.

Market impact of this probable Cuban oil production

If this type of projection materializes, offshore oil production would allow Cuba to become self sufficient but would not transform the country into a world-class exporter. At best, it would allow Cuba to export some modest volumes of offshore oil, perhaps up to 100,000 barrels a day for relatively brief periods of time.

In the context of U.S. oil import requirements this is an insignificant volume. What this means is that Cuba will probably never become a significant source of oil for the United States.

Potential political impact of future Cuban oil developments


Due to the prolonged period required, any significant oil production established in Cuban offshore waters will only have a limited political impact on Cuban- Venezuelan relations. In fact, there is a very good probability that in ten more years the current main political actors in Venezuela and Cuba will no longer be active. For the last 5 years or so Hugo Chavez has been sending the Cuban government close to 100,000 barrels per day of Venezuelan crude oil and products. This represents a huge gift of close to $3 billion per year, which is deeply resented by the majority of the Venezuelan people. There is no doubt that soon after Chavez is ousted from power such an enormous transfer of Venezuelan wealth to Cuba will cease. The energy deficit of Cuba would abruptly become enormous, while its economic impact on the regime would likely lead to major political changes in Cuba. Any offshore oil discoveries will likely arrive too late to change this outlook.


Similar considerations apply to the relationship between Cuba and the United States. Offshore oil developments will be too little, too late, to benefit the current Cuban regime. If anything, future Cuban oil production could benefit the democratization of Cuba, since U.S oil technology, capital and human resources will most probably be required to develop the offshore resources.

Gustavo Coronel, who served on the board of directors of Petróleos de Venezuela (PdVSA), has had a long and distinguished career in the international petroleum industry, including in the USA, Europe, Venezuela and Indonesia. He is an author, public policy expert and contributor to

SFPPR News & Analysis.