3 September 2022 - 13:15
  • News Code: 461502
Ten Fields of Iran, Cuba Energy Cooperation

TEHRAN (Shana) -- Iran’s Minister of Petroleum Javad Owji during his trip to Latin America in May, met with Cuban President Miguel Díaz-Canel and signed two memoranda of understanding on energy and agriculture. Mehdi Safari, Iran's deputy foreign minister for economic diplomacy, considers bartering with Cuba very instrumental in the relations between the two countries.

Accordingly, Mr. Safari argues, Iran's need for grains will be provided by Cuba in exchange for crude oil from Iran. He also considers Cuba to be a very important market in Central and Latin America for the export of Iranian products.

In a report prepared by the Institute for International Energy Studies (IIES), the opportunities for cooperation between Iran and Cuba have been outlined in 10 sectors: bartering crude oil with agricultural products, refinery development, upgrading and construction, focus on the sales network of petroleum products in Venezuela to Cuba, cooperation in the field of oil and gas, exploration of oil and gas in the offshore sector, export of E&P technical and engineering services and labor, establishment of joint companies in this field, cooperation in the field of renewables, using new methods for energy production, dams construction, electricity production, especially hydroelectricity, cooperation in the mining and metals sectors, import of mineral products, developing chemical production industries.

Also, considering the US oil embargoes on Iran, the sale (barter) of crude oil against goods may be one of the suitable opportunities for cooperation between the two countries, and finally, considering China's position in Cuba's economy, as well as the Belt and Road project, the country's potential to transfer Iranian goods, especially oil, can be taken advantage of.

Vast Potential for Iran-Cuba Cooperation

Despite the vast possibilities for a dramatic improvement in the level of economic cooperation between Iran and Latin American countries, this necessity has always been neglected in the post-revolution administrations in Iran to varying degrees. Iran's relations with Latin America in the political and economic fields have had ups and downs under different administrations, the peak of which was under the 9th and 10th administrations in the years between 2005 and 2013, when cooperation in the fields of water and electricity was the case. Under the 11th and 12th administrations, given the type of approach of the Rouhani administration and its priorities, the ties continued less seriously, and mostly remained at the level of a few diplomatic exchanges.

Relations between Cuba and Iran began in the aftermath of the 1979 Islamic Revolution. Although Iran and Cuba have a long history in economic, scientific, military, security, and intelligence arenas, figures indicate that the two countries have not been successful in expanding bilateral trade relations. There are significant capacities and potential for economic and commercial cooperation between the two, even though in this direction, transit and banking relations are two serious obstacles that must be carefully dealt with.

Cuba: Big Energy Importer

Cuba is an archipelago in the Caribbean Sea with a population of 11.2 million people. The country almost imports all its energy needs through imports, but the potential of oil and gas in its offshore sector could help reduce its dependence on imports. Cuba has struck many contracts with various countries in exploration and drilling arenas. However, as a result of the US trade embargo against Cuba, American companies cannot possess Cuban oil assets but are allowed to participate in drilling, as well as technology and equipment transfer merely with executive permits.

Due to the fact that Cuba has included economic improvement and development in its master plans, it seeks to develop renewable resources with the aim of diversifying its energy sources, and in 2014, the policy of developing renewable energy resources and efficient use of energy until 2030 was approved, which is designed for gradually curbing fossil fuel consumption and providing 24% of energy from clean and renewable sources by 2030. The policy is also aimed at encouraging foreign investment in large and small local projects with the aim of improving energy efficiency and self-sufficiency through facilities connected to Cuba’s national electricity grid. According to some estimates, to develop more than 2,000 megawatt hours of new power generation capacity through renewable sources over the next 9 years, more than $3 billion of funding is needed in this Latin American country.

Expanding Use of Renewables

Cuba's electricity demand is increasing as a result of new economic reforms. However, stagnant power generation causes occasional power shortages and blackouts. Cuba ended 2020 with an installed capacity of approximately 300 MW/h of renewable resources, some of which were supported by international institutions and causes. Recent studies show that the expansion of renewable sources may reduce the use of fossil fuels in electricity production by 2.3 million tons, and curb emission of carbon dioxide by 8 million tons per year.

Net Oil Importer but Self-Sufficient in Gas

Cuba is a net importer of oil. In 2019, it produced about 48,000 barrels per day of oil and other liquids and consumed 164,000 barrels per day. It imports most of its oil from Venezuela. Due to the economic and political crises in Venezuela, the arrival of crude oil shipments from Venezuela to Cuba has decreased.

According to the US Energy Information Administration, Cuba has 100 million barrels of proven crude oil reserves. The prospect of oil discovery in the deep waters off the northern coast of Cuba has attracted many oil and gas companies from around the world to the country. However, as a result of geological and technological challenges, deep water exploratory drilling has so far yielded no results.

Cuba has four refineries, all of which owned and run by the state-run Petroleos Company with a total crude oil refining capacity at 134,200 barrels per day as of January 2016, according to OGJ. The second largest of the four refineries, Nico Lopez, has a crude distillation capacity of 36,400 barrels per day.

Cuba's natural gas reserves stood at 2.5 trillion cubic feet and natural gas production was 34 billion cubic feet in 2019. Also, Cuba’s natural gas consumption in 2019 was about 34 billion cubic feet, which is almost equivalent to the domestic production of the country. In other words, there is no need to import in this field and all the required gas is supplied from domestic sources.

Oil, Gas Production Drop since 2015

According to the US Energy Information Administration, Cuba’s oil and natural gas production has fallen since 2015. Coal consumption is 0.5 million tons per year, which is fully met via imports. Most of the electricity generation in Cuba is supplied using fossil fuels, and renewable energies still play a very small role in power generation. The electricity output of the country in 2020 was about 19 billion kilowatt hours, which has remained almost unchanged since 2016. One of the reasons for the lack of growth in electricity production despite having production capacity is the lack of required and accessible fuel reserves in the electricity production system, which inevitably affects the supply of electricity. For Cuban families, the current crisis is reminiscent of the long blackouts of the early 1990s, when Cuba lost its main fuel supplier after the collapse of the Soviet Union. Sanctions disrupt access to financial credits for the purchase of parts and equipment and cause delays in the necessary overhauls and maintenance of thermal power plants.

Analysts warn that Cuba's electricity grid is in a critical state, and the high level of dependence on fuel imports is considered a vulnerability for the country, as it undermines the energy sovereignty and independence in Cuba. All of Cuba's thermal power plants, which were mainly built with the old technology of the Soviet Union and the socialist bloc of Eastern Europe, have passed their 30-35-year lifespan, and according to Cuban industrial‍ executives, it costs about $40-80 million in capital to repair each of these plants.

Currently, the policy of the 13th administration of Iran is to develop energy diplomacy and constructive cooperation rather than inhibiting competition, therefore, during the last 10 months, Iran’s Minister of Petroleum visited several neighboring countries and Latin America, and of course, he also hosted his counterparts from these countries. Considering the good relationship between the two countries, we expect to see the expansion of relations between the two countries in the energy sector and Iran's cooperation with Cuba in this sector in near future. It is noteworthy that Iran holds the world’s largest oil and gas reserves combined, and considering the growing need of countries for fossil energies and the slow transition of energy, it could be a reliable partner for buyers of oil and technical and engineering services.

Courtesy of Iran Petroleum

News Code 461502


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