HAVANA, (Reuters) – China is taking another great leap forward in its Latin American energy plans, raising Cuba’s energy importance in the process, with a deal to lead a $6 billion refinery expansion project on the communist island, experts said this week.
The project, to be funded mostly by China’s Eximbank, is the latest of several significant moves in the region for the Asian power as it continues to expand its global influence.
For Cuba, the refurbishing of its antiquated refinery in the coastal city of Cienfuegos will provide an outlet for oil it hopes to tap soon in the Gulf of Mexico, while also laying the groundwork for the island to possibly become a key oil transhipment point for the Caribbean basin.
A unit of state-owned China National Petroleum Corp expects to begin work in early 2011 on the project that will more than double the refinery’s capacity to 150,000 barrels daily and include construction of a liquefied natural gas terminal.
Venezuela, Cuba’s closest ally, will provide financial guarantees in the form of oil, a pattern followed by Beijing in other deals for energy in Latin America.
In the past two years, China has financed projects and formed joint ventures in Venezuela, Brazil and Ecuador which are expected to bring it at least 500,000 barrels of crude oil per day.
It has leased a 5 million barrel storage facility on the Caribbean island of St. Eustatius and reportedly talked with San Antonio, Texas-based refining giant Valero Energy Corp. about buying its refinery on the island of Aruba.
The oil marriage of China with Latin America is one made in energy heaven, said analyst RoseAnne Franco at energy and mining consulting firm Wood Mackenzie in Houston.
“The regions are clearly of complementary interest. China is looking for energy security while Latin America is eager for new consumer capital markets,” she said. “There is a good foundation there for the relationship.”
The Cienfuegos project is part of larger modernization of Cuba’s energy infrastructure. Brazil is financing the refurbishing and expansion of the port at Mariel, which will be the logistical platform for offshore oil operations in the Gulf of Mexico set to begin next year. Venezuela, Cuba’s principal ally and top trading partner, is refurbishing a tanker port at Matanzas and rehabilitating a cross-country pipeline to the Cienfuegos refinery. It has also committed to constructing a 150,000 barrel per day refinery at Matanzas, which is about 60 miles (96 km) east of Havana.The expectation that Cuba will find significant offshore oil reserves is driving much of the work. Several companies are planning to sink exploratory wells off Cuba’s northern coast starting next year.
The U.S. Geological Survey has estimated Cuba has about 5 billion barrels of oil and 10 trillion cubic feet of natural gas offshore, but Cuba says it could have at least 20 billion barrels of oil.
