20bn barrel oil discovery puts Cuba in the big league

20bn barrel oil discovery puts Cuba

Cuba in the big league Now

WANNA BET OIL IS EXCLUDED FROM

THE EMBARGO?

• Self-reliance beckons for communist state
• Estimate means reserves are on a par with US

A worker walks at an oil rig in Havana, Cuba

A worker walks at an oil rig in Havana, Cuba. Photograph: Enrique De La Osa/Reuters

Friends and foes have called Cuba many things – a progressive beacon, a quixotic underdog, an oppressive tyranny – but no one has called it lucky, until now .

Mother nature, it emerged this week, appears to have blessed the island with enough oil reserves to vault it into the ranks of energy powers. The government announced there may be more than 20bn barrels of recoverable oil in offshore fields in Cuba’s share of the Gulf of Mexico, more than twice the previous estimate.

If confirmed, it puts Cuba’s reserves on par with those of the US and into the world’s top 20. Drilling is expected to start next year by Cuba’s state oil company Cubapetroleo, or Cupet.

“It would change their whole equation. The government would have more money and no longer be dependent on foreign oil,” said Kirby Jones, founder of the Washington-based US-Cuba Trade Association. “It could join the club of oil exporting nations.”

“We have more data. I’m almost certain that if they ask for all the data we have, (their estimate) is going to grow considerably,” said Cupet’s exploration manager, Rafael Tenreyro Perez.

Havana based its dramatically higher estimate mainly on comparisons with oil output from similar geological structures off the coasts of Mexico and the US. Cuba’s undersea geology was “very similar” to Mexico’s giant Cantarell oil field in the Bay of Campeche, said Tenreyro.

A consortium of companies led by Spain’s Repsol had tested wells and were expected to begin drilling the first production well in mid-2009, and possibly several more later in the year, he said.

Cuba currently produces about 60,000 barrels of oil daily, covering almost half of its needs, and imports the rest from Venezuela in return for Cuban doctors and sports instructors. Even that barter system puts a strain on an impoverished economy in which Cubans earn an average monthly salary of $20.

Subsidised grocery staples, health care and education help make ends meet but an old joke – that the three biggest failings of the revolution are breakfast, lunch and dinner – still does the rounds. Last month hardships were compounded by tropical storms that shredded crops and devastated coastal towns.

“This news about the oil reserves could not have come at a better time for the regime,” said Jonathan Benjamin-Alvarado, a Cuba energy specialist at the University of Nebraska.

However there is little prospect of Cuba becoming a communist version of Kuwait. Its oil is more than a mile deep under the ocean and difficult and expensive to extract. The four-decade-old US economic embargo prevents several of Cuba’s potential oil partners – notably Brazil, Norway and Spain – from using valuable first-generation technology.

“You’re looking at three to five years minimum before any meaningful returns,” said Benjamin-Alvarado.

Even so, Cuba is a master at stretching resources. President Raul Castro, who took over from brother Fidel, has promised to deliver improvements to daily life to shore up the legitimacy of the revolution as it approaches its 50th anniversary.

Cuba’s unexpected arrival into the big oil league could increase pressure on the next administration to loosen the embargo to let US oil companies participate in the bonanza and reduce US dependency on the middle east, said Jones. “Up until now the embargo did not really impact on us in a substantive, strategic way. Oil is different. It’s something we need and want.”

China extends influence into Central Asia

China extends influence into Central Asia

China has begun a multi-billion-pound scheme in the far-Western province of Xinjiang to build roads and railways that will open up Central Asia.

By the end of this year, nine railway lines will be under construction, including a railway from China to Pakistan and a rail link through Kyrgyzstan and Uzbekistan, at a total cost of over £50 billion.

Lines will also run east from Xinjiang into Mongolia and onto the Qinghai plateau. Currently, the only line linking Xinjiang with central Asia is a 285-mile line to the Alataw Pass which connects to Kazakhstan’s rail system.

More than 1,300 miles of track will be laid in the next decade, almost doubling the infrastructure in the area, according to Wu Jian, the deputy head of the railway bureau in Urumqi, the capital of the restive Xinjiang province.

The move will connect Xinjiang to railway lines as far off as Moscow and Tehran and a direct route is also being planned over through the Hindu Kush into Kabul. The move will open up Central Asia to Chinese goods and companies, and will serve as conduits for oil and petrol to be brought back.

Xinjiang, with almost 140 billion barrels of oil reserves and 11 trillion cubic metres of gas, is one of the main sources of Chinese energy. The region is also criss-crossed with pipelines from Russia and Kazakhstan which help to power the eastern capitals of Beijing and Shanghai.

China is also gambling that increased trade with its Muslim neighbours may help to calm disputes and religious unrest within Xinjiang, which has been a political thorn in the side of the leadership.

Xinjiang’s native Uighur population are ethnic Muslims who have railed against Chinese rule. Uighur pressure groups have complained that it is Han Chinese, rather than the locals, who have most benefited from the region’s trade links and energy wealth.

Although annual natural gas production in the Tarim Basin has increased 20 times between 2000 and 2007, the profits have flowed eastwards. In 2005, Xinjiang’s provincial government was only given 240 million yuan (£19 million) out of the 14.8 billion yuan of tax revenue from the oil industry.

Wang Lequan, the hardline politburo member who is governor of Xinjiang, recently vowed to conduct a crackdown against separatist Muslims, and banned the observance of the Ramadan festival.

“We must always maintain a high-pressure, strike-hard posture, adhering to a policy of taking the offensive, striking when they show their heads and making pre-emptive attacks,” he said, vowing to spend winter and spring conducting a “concentrated re-education across the whole region”.

How the West is losing the energy cold war

How the West is losing the energy cold war

Russia’s victory in Georgia is having far-reaching effects as its neighbours rethink the wisdom of selling gas and oil to Europe

Picture yourself as the autocratic leader of a small-ish former Soviet republic, bubbling with oil and gas and keen to sell it. But where? One route is old, cheap and easy. It leads north, to Russia. But memories of the Kremlin’s imperial embrace are still fresh. The other is new, costly and tricky. It goes west, in both senses – via your neighbour, Georgia, and to supply Western customers direct.

Azerbaijan, a country of 8 million people on the Caspian Sea, plumped for the western route. After all, America was the strongest country in the world and Russia – back in the 1990s – was weak. So Azerbaijan supported the building of a $4 billion, 1,000-mile-long, million-barrels-a-day oil pipeline from Baku, its capital, via Tbilisi, in Georgia, to Ceyhan, a port on Turkey’s southern coast. BTC, as it is known, is the only oil pipeline from the former Soviet Union not controlled by the Kremlin.

Azerbaijan also supported the Baku-Tbilisi-Erzurum gas pipeline into eastern Turkey. Europe, with US backing, wants to extend it all the way to Austria. That project is named Nabucco – an operatic touch that underlines its importance in saving Europe from energy slavery.

Now not only is that plan in tatters but much else besides. As the shock waves from Russia’s dismemberment of Georgia echo across the region, Western interests are toppling like dominos. Almost unnoticed in Britain, Dick Cheney, the US Vice-President, paid a near-disastrous visit to Azerbaijan last week. Its President, Ilham Aliyev, inflicted a series of public snubs, including phoning the Russian President, Dmitri Medvedev, the moment that a meeting with Mr Cheney finished. A disgruntled Mr Cheney apparently then failed to appear at an official banquet. Azerbaijan seems to be ruling out supplying gas to Nabucco.

The reason is simple – Mr Aliyev does not want his country to suffer Georgia’s fate. It all too easily could. Like Georgia, Azerbaijan is not shielded by Nato. Talks on a US military presence have got nowhere. Relations with the EU are dormant, not helped by rigged elections and bullying of the opposition. Russia has been stirring up the Lezgin ethnic minority, whose homeland straddles the border between Russia and Azerbaijan. Mr Aliyev, an instinctive fence-sitter, has been talking nicely to Russia’s energy giant Gazprom. It has offered to buy his country’s entire gas exports – at world prices.

Just across the Caspian Sea, Kazakhstan and Uzbekistan have stitched up a deal to build a new gas export pipeline north to Russia. That further kiboshes Western hopes of finding gas from Central Asia to fill Nabucco, which is threatened by the rival South Stream project across the Black Sea, promoted by Russia.

It gets worse. Even Turkey, the linchpin of Western security planning in the region, is wobbling. It depends on a Russian pipeline across the Black Sea for most of its gas. The Kremlin has been assiduously cultivating Ankara, just as the EU has been giving it the cold shoulder. The sight of a semi-independent Kurdistan emerging as the result of the US invasion of Iraq has chilled relations further.

Iran is the other beneficiary of Georgia’s defeat. If the westward route is blocked, the choice for Central Asia and the Caucasus is to deal either with the mullahs of Tehran or with the former KGB men in Moscow. Neither offers much comfort to the West. Iran has said that it will block a gas pipeline across the Caspian – a vital link in the Nabucco project.

It may seem hard to get worked up about this in Britain. But if energy supplies to the rest of Europe are under Russia’s thumb, Britain’s security is deeply compromised. The absurdity is that Europe should be laying down terms to Russia. Not only is the EU the Kremlin’s largest customer, Europe’s economy is more than ten times larger than Russia’s, its population more than three times bigger. The magnet of European integration has brought peace to the western Balkans: if it is a choice between snuggling up to Russia or getting on track to join the EU, countries such as Serbia choose West over East. The same is happening, tantalisingly, in Belarus, where the autocratic leader Alexander Lukashenko is desperately flirting with Europe in the hope of staving off the day when his country is swallowed up in a new Russian-run superstate. Belarus has released all its political prisoners and is hoping that the EU will now relax sanctions.

The West used to be deluded about the former KGB regime in Russia. Belatedly it has shed its illusions. But it is still fatally divided and distracted. Germany and Italy prize their economic ties with Russia far above the interests of nominal allies in Eastern Europe and the former Soviet Union. British Eurosceptics react with garlic and silver bullets when a common European foreign policy is discussed. America is far away, bogged down in two other wars. It is not going to fight harder for Europe than Europe itself will do. Russia knows this, and believes it has a green light to push ahead. Turn down the heating: this is going to be a long winter.

Edward Lucas is the author of The New Cold War

The £2 trillion craziness that swept the globe

The £2 trillion craziness that swept

the globe

Let’s be generous here. Perhaps history will prove that the events of this week were all a clever plot by the world’s leaders to deter an alien invasion.

By Alistair Osborne

Recapitalising the banks was the final piece in Flush Gordon’s cistern-bursting £500bn bail-out plan. He also earmarked £250bn of Government guarantees to coerce banks into lending to each other again and £200bn of emergency funding from the Bank of England’s gushers.

Increasingly febrile markets had shifted their focus from the banks to the world economy. Traders were now in a right sweat over the looming global slump – their panic over the pain required to pay back a £2 trillion bail-out bill exacerbated by more specific concerns.

Who, they wonderedm, is on the hook for $360bn of default insurance arising from the toxic dump at Lehman Brothers? What is the $2 trillion hedge fund industry sitting on? And will insurance companies become the next major casualties?

So began the rollercoaster. By Wednesday, data was coming thick and fast. None of it was pretty.

The UK unemployment figures – a lagging indicator of economic health – confirmed that. They showed the jobless total rising at the fastest rate for 17 years.

Abroad, evidence that the crisis on Wall Street had extended to Main Street came with September’s 1.2pc fall in US retail sales – far worse than the 0.7pc drop expected. Meanwhile San Francisco Federal Reserve Bank president, Janet Yellen, dared to utter the dreaded “R” word.

Recession fears swept the market, puncturing the commodity bubble on the rational grounds that if the global economy goes into reverse, demand for raw materials and manufactured goods plummets.

Even China, the engine of world growth was beginning to splutter, according to Rio Tinto chief executive Tom Albanese. “China is not completely insulated from OECD recession,” he warned.

Those two figures scarcely tell the story. What, you wonder, could possibly top this week’s dramas? An alien invasion perhaps. (Read full article here)