Energy Crisis in Cuba?

By Pilar Montes

HAVANA TIMES — If the hypothetical rule of three is used to answer this question, shall we say, to the Venezuelan government’s financial difficulties and Cuba’s own insufficient energy resources, the economic crisis will hit Cuba suddenly and it could mean the end of its revolutionary era.

The first test case for the Cuban revolution was in 1962, when the US put a trade embargo on Cuba and the second, which was even worse, came when the Socialist bloc was dissolved, from which we imported and exported goods accounting for practically 80% of our national revenue and consumable goods.

However, the lights on the Morro lighthouse weren’t switched off in the Cuban capital. Today, reducing our oil consumption estimated at 140,000 barrels per day, according to Jorge R. Pinon from the University of Texas, by a third will hit us hard leaving us with just 93,332 barrels a day for daily consumption. Another source calculates that our oil consumption stands at 190,000 barrels a day, which means it would leave us with just 126,666 barrels available.

If the worst comes to the worst, this would mean that production industries would still have fuel for two of their 8 hour shifts instead of three.

At times of energy scarcity, a cutback in transporting agricultural produce for consumption in cities would make a significant difference. Here our energy crisis wastes what Nature has given us because mango and avocado harvests as well as those of other fruits and vegetables were reaching the markets in cities regularly.

There are cutbacks in working hours at ministries and state departments, which affect society much less and which took just as long to process paperwork beforehand, as well as a cutback in fuel for government vehicles by a third. According to the million people who have to travel on public transport everyday, the number of state cars could be cut by a third too and this third should be used by the public instead.

By reducing the amount of public transport available, private collective taxi drivers have taken advantage of the situation and have raised the prices of their service, which has caused an uproar on part of all those who use these taxis. Anti-corruption measures applied in this sector have meant that diesel sales at state gas stations have increased (as nearly all private taxis used to get their fuel on the black market) and they’ve applied tighter controls on the State’s oil reserve.

What does the Venezuelan government have to say?

On July 12th, in Havana, the general manager of Venezuela’s state oil company (PDVSA) in Cuba, Luis Morillo, stated that “there had not been any cutbacks in Cuba’s oil supply and that there was only a technical and engineering problem at the Cienfuegos refinery.”

Due to this technical problem, “we will close certain areas of the oil refinery for 120 days over the course of this year so as to repair this problem and to modernize certain procedures,” Morillo said.

Cuba has three other oil refineries, as well as the one in Cienfiegos, which isn’t completely active (and many believe it’s the only one we have), there are refineries in: Bahia de La Habana (in the west), Santiago de Cuba (in the east) and Sancti Spiritus (in the center), which are able to refine about 60,000 barrels per day, so 31% of the oil we import is already refined or are derivatives.

According to the agreement signed in 2000, Venezuela would provide Cuba with 53,000 barrels per day.  When this agreement was updated and countersigned this year during President Nicolas Maduro’s brief visit to the island, they stuck to an average of 110,000 barrels per day which they’d been selling to Cuba since 2014.

BBC World, based on the opinions of experts, points out the fact that, at least for the time being, Cuba isn’t facing anything like the collapse that brought about the so-called “Special Period” in the ‘90s.

Jorge R. Pinon, a professor at the University of Texas and an expert in energy-related issues, agrees with this opinion, based on the fact that Cuba consumes 140,000 barrels per day (other sources claim that this is so much as 190,000 barrels a day), nationally produces more than 50,000 barrels per day (others say it’s 70,000) and is still receiving about 80,000 barrels per day out of the 110,000 barrels they agreed with Venezuela in the latest agreement signed by both governments.

Pinon claims that these statistics correspond to the movement of oil tankers that carry oil within the Caribbean, which he and his team monitor as part of their investigation.

Expert Sonia Velazquez Leon, in an essay she published on March 3, 2016 with the Spanish Institute for Strategic Studies (IEEE), about the funding of Petrocaribe’s oil supplies, said Venezuela is using the following scale:

If the price per barrel is above 30 USD, they will finance 25%; if it’s above 40 USD, they’ll finance 30%; if the price per barrel is more than 50 USD, the mechanism will allow them to cover 40% of the oil bill of its recipient countries and if the price of oil per barrel is above 100 USD, they will finance 50% of these oil costs.

Funding received will be paid over the course of 25 years with a 2% interest rate which will go down to 1% if prices are more than 40 USD per barrel; and there’s a 2 year grace period.

Petrocaribe’s Article V upholds the fact that supplies will be for domestic consumption alone, except in the case of Cuba who can sell these oil supplies on the international market thanks to the Caracas Energy Agreement, which was signed on October 19th 2000.

Unexplored resources

At the turn of this century, the possibility of finding oil in Cuba’s continental shelf attracted oil companies from Brazil, Spain, Canada, Norway, India, China and Venezuela to the island. The 27 licenses issued, out of a total of 57 blocks, gave the Cuban government a billion dollars. But since then, some companies such as Spain’s Repsol have pulled out, as these reserves have yet to give the results that were expected.

Cuba affirms that there are about 20 billion barrels of oil in its Exclusive Economic Zone, while the US estimates that this is in reality only about 5 billion barrels.

On the other hand, Russia confirmed that it will follow the 2012-2020 Bilateral Economic Agenda and strengthen its ties; the Russian oil company Zarubezhneft and the Cuban equivalent Union Cuba-Petroleo will work together on oil fields located in the Boca de Jaruco area, in the Mayabeque province, having agreed to continue oil exploration in Cuba in 2014.

An energy saving reserve which is just as important lies in our electric distribution lines, which are constantly being updated because of their obsolescence, as well as in our industrial procedures and residential consumers.

On the other hand, sources of renewable energy continue to be developed, however we’ve only managed to provide 4% of what Cuba produces electricity wise in this way.

Blackouts at homes

Power outages suffered in residential areas, especially where I live, are mainly due to the poor condition of electricity cables and the usual electric storms we have in the summer. There still haven’t been more blackouts this year than there were last summer.

At times, there are also blackouts because trees are pruned before the rainy season starts.   It’s nothing like it was back in 1993-94 regarding energy and as to finances we’ve renegotiated our bilateral debts, thus we’re not experiencing a crisis.

Energy consumption in government offices and public buildings, as well as state cars, have drastically been cut. Journalists who have their own cars, a minority, who used to receive 40 liters a month before, have watched their quota fall to 20 liters, although the truth of the matter is that they never used their cars for journalism-related work but instead they used it to get from home to work and vice-versa, as well as the odd family outing.

In conclusion, the most serious social consequence has been that many Cubans have run out of holes on their belts and can’t tighten them anymore. As compensation for this uncertain summer, many will enjoy the TV broadcast of the Rio Olympics.