Daily Management Review

Venezuela’s misfortunes can ignite energy crisis in Cuba


Last week, the leader of the Venezuelan opposition Juan Guaidó told reporters that he ordered to stop the supply of oil to Cuba. He explained his decision by a major accident in the country's energy system, which led to de-energizing of most of the country. The explanation seems quite logical. However, the opposition’s agenda includes stopping supply of Venezuelan oil to Cuba for ideological reasons, so to speak.

Havana is highly dependent on Caracas in the field of energy. Venezuela is the largest supplier of oil to Cuba. Oil is supplied on the basis of a barter deal concluded by the late leaders of the two countries: Hugo Chavez and Fidel Castro. Cuba regularly receives Venezuelan oil, and “pays for” it with medical professionals, whose professional skills are known far beyond the borders of the island.

At the peak of such a barter partnership, Cuba daily received more than 100 thousand barrels of oil. Now, when not only an economic but also a political crisis is raging in Venezuela, the volume of Venezuelan oil for Cuba has dropped at least twice. Yet, such volumes of oil play an important role in supplying Cuba with fuel and energy. If the supply is completely stopped, then the island will begin to have electricity shortages no less than in Venezuela.

Guaidó’s call to stop supplying oil to Havana last week is not the first. The main Venezuelan oppositionist increased attention to the "Cuban" article of Venezuela’s exports as early as the end of February. His main argument is that supplying oil to Cuba, when such a crisis rages at home, is at least silly.

Last Saturday, Juan Guaidó wrote on Twitter that Venezuela supplies Havana with 47 thousand barrels per day for $ 2.58 million, and that this oil will be better used in Venezuela itself.

“Venezuela should save its resources now more than ever before, and not spend them for dubious purposes,” the oppositionist’s tweet says. “For many years our oil has been delivered to Cuba on the basis of some kind of ideological fraternity that is completely empty concept and which was invented in order to justify the supply ".

The crisis in Venezuela has already forced Havana to make adjustments to its energy policy. Cuba has recently increased oil imports from Russia. Last year, a contract was also signed to increase oil supplies from Algeria, another major supplier of oil for Venezuela. Despite efforts to expand energy supplies, Venezuelan oil continues to play an important role mainly because it was formally, at least, delivered free of charge.

By the way, Cuba may well have its own oil. Last year, Australian company Melbana Energy, the only foreign company present in the country's energy sector, announced that the potential reserves of only one potential field are 12.7 billion barrels. The chances of finding and extracting it are, according to experts, from 14 to 32%. Drilling should begin this quarter.

However, development of its own deposits will take a lot of time, which Cuba does not seem to have. This means that it will remain volatile in the foreseeable future. 

source: oilprice.com