Castro's death raises questions regarding Cuba's energy future

Monday, November 28, 2016

The death of Fidel Castro on Friday raises questions regarding the island's future political and economic direction, and whether Fidel's brother Raúl will remain faithful to the ideals of the Cuban revolution or try to steer the country toward a more open economy in search of foreign investment and increased trade.

Uncertainty had already emerged about Cuba as a result of the election of Donald Trump as US president, who said during his campaign that he would unravel the diplomatic ties restored last year on the initiative of Barack Obama.

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In the wake of Castro's death, so far there have been no signs that the country's policies will change, but companies with investments in the country, such as in the energy sector, may be feeling nervous.

The ongoing crisis in Venezuela has reduced oil shipments to Cuba and forced the island nation to seek crude elsewhere, with Raúl Castro having met Russian President Vladimir Putin earlier this year to request an increase in oil shipments. The reduction in supplies from Caracas has halved production at Cuba's Cienfuegos refinery and halted plans to build an adjacent petrochemical complex with Venezuelan investment, according to media reports earlier this month.

In October, Mexican, Cuban and US officials held a round of talks to discuss the borders of the so-called Western Polygon, in order to determine to which country the area's potential oil reserves belong.

Cuban state oil firm Cupet said in 2015 that it planned to begin deepwater exploratory drilling in the Gulf of Mexico in late 2016 or early 2017 as part of its production-sharing contracts with Venezuela's PDVSA and Angola's Sonangol.

Earlier this month, Australian oil company Melbana Energy received a contract extension from Cupet to carry out exploration work on onshore block 9, with the company having announced in October it was planning to drill a well at the block in the first quarter of 2018.

Foreign investment is beginning to flow into Cuba's renewable energy sector and the country plans to build 73 solar facilities in five provinces by 2030, according to official newspaper Granma.

Work began in September on the 2.2MW El Pino solar park in Cienfuegos, a province that aims to install 50MW of capacity by 2030.

Among the investors in the country's renewables sector is UK firm Hive Energy, which is building a 50-megawatt PV project in Mariel, and which will be Cuba's first utility-scale project, which is slated for completion in 2018.