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110 At the outset of this book we asked the question, “What would an ideal strategic energy policy look like for the United States, or any other country, for that matter?” The Current Outlook Mahmoud Amin El-Gamal and Amy Myers Jaffe partially answered that question for us in their paper “Energy, Financial Contagion and the Dollar,”1 by setting out a detailed analysis of the tasks that a strategic energy policy should accomplish, among them: —To ensure that markets operate efficiently so as to develop the infrastructure necessary to meet growing energy requirements —To ensure the well-being of the human habitat and ecosystem —To guarantee that mechanisms are in place for warding off and, if necessary , managing disruptions to energy supply They provided a refined definition of what energy security is and how it is related to U.S. geostrategic interests specific to the discussion of Cuba, the Caribbean, and Latin America. Energy security is a critical consideration for three reasons. 1. U.S. energy independence is not attainable. 2. The policy instruments available to deal with energy supply disruptions are increasingly inadequate. five Prospects for U.S.-Cuban Energy Engagement: Findings and Recommendations JONATHAN BENJAMIN-ALVARADO 12250-05_CH05_rev2.qxd 9/3/10 12:44 PM Page 110 Prospects for U.S.-Cuban Energy Engagement 111 3. The United States needs to articulate a new vision of how to effectively manage international energy interdependence. Where Cuba is a factor in that discussion, we were compelled to ask the following questions concerning the implications of a growing presence of these external actors in Latin American energy markets: —In what way will the ongoing development and evolution of Cupet, Cuba’s state oil company, limit or obstruct U.S. efforts to meet its strategic objectives? Any answers must account for the relationship among Cupet, PDVSA (Petróleos de Venezuela), and the Venezuelan state. —What role can international oil companies play in the development of energy resources and infrastructure in Cuba in both the near and long term? Cuba is seeking to develop a production capability of its North Coast Reserves, leading national oil companies (NOCs) from nine different countries to sign lease agreements with the Cuban regime for offshore tracts. —What impact will competition for scarce petroleum resources with Brazil, Russia, India, and China have on U.S. energy security, especially in light of the recent energy development agreement between Russia and Cuba, and China’s advance into Latin American energy markets? New players in Cuba and Latin America increase uncertainty over energy sources on which the U.S relies for its economic lifeblood. Many of these and other energy sources are controlled by NOCs: —Seventy-seven percent of proven oil reserves globally are held by NOCs. —Eleven percent of proven oil reserves are held by NOCs with equity access. —Only 11 percent of proven oil reserves are open to international oil companies (IOCs); many of these are based in the United States. The authors of chapter 2, Jorge R. Piñón and Jonathan BenjaminAlvarado , find that there are a number of key issues to consider regarding the productive capacity of Cuba’s oil and gas resources. First, Cuba has seen close to $2 billion of direct foreign investment since 1991 in its upstream oil and natural gas sector, with very good results. Crude oil liquids production reached a peak level of 65,531 barrels per day in 2003, up from 9,090 barrels per day in 1991. Since 2005 Cuba has seen its crude oil production level off at around 52,000 barrels per day. Second, Cuba’s realized crude oil value could improve substantially once the country is able to monetize its heavy oil production by means of its own future heavy oil conversion refinery processing capacity, or to market its crude oil to U.S. Gulf Coast refining companies. Third, Cuba’s onshore and coastal heavy 12250-05_CH05_rev2.qxd 9/3/10 12:44 PM Page 111 oil production seems to have reached a plateau at around 52,000 barrels per day, but once Cupet has access to the services, technology, equipment, and capital available through independent U.S. oil and oil services and equipment companies (when the trade embargo is lifted or modified), Cuba’s heavy oil production potential could grow to an amount in excess of 75,000 barrels a day. Deficiencies in Cuba’s oil-refining sector—including outdated technology that is unable to process heavy crude—coupled with an environmentally sensitive tourist industry...


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