Author Archives: Haven Paul

Cuba waits anxiously for oil dreams to materialize

By PAUL HAVEN. Associated Press, May 27, 2012

HAVANA (AP) — It was supposed to be Cuba’s economic savior: vast untapped reserves of black gold buried deep under the rocky ocean floor.

But the first attempt in nearly a decade to find Cuba’s hoped-for undersea oil bonanza has come up dry, and the island’s leaders and their partners must regroup and hope they have better luck – quickly.

Experts say it is not unusual that a 3-mile (4.8-kilometer) deep exploratory well drilled at a cost of more than $100 million by Spanish oil giant Repsol was a bust. Four out of five such wells find nothing in the high-stakes oil game, and petroleum companies are built to handle the losses.

But Cuba has more at stake, and only a few more spins left of the roulette wheel. The enormous Scarabeo-9 platform being used in the hunt is the only one in the world that can drill in Cuban waters without incurring sanctions under the U.S. economic embargo, and it is under contract for only one to four more exploratory wells before it heads off to Brazil.

“If oil is not found now I think it would be another five to 10 years before somebody else comes back and drills again,” said Jorge Pinon, the former president of Amoco Oil Latin America and a leading expert on Cuba’s energy prospects. “Not because there is no oil, but because the pain and tribulations that people have to go through to drill in Cuba are not worth it when there are better and easier options in places like Angola, Brazil or the U.S. Gulf of Mexico.”

A delay would be catastrophic for Cuba, where 80-year-old President Raul Castro is desperately trying to pull the economy out of the doldrums through limited free-market reforms, and has been forced to cut many of the subsidies islanders have come to expect in return for salaries of just $20 a month.

It could also leave the Communist-governed island more dependent on Venezuela, where President Hugo Chavez is ailing with cancer. Chavez provides Cuba with $3 billion worth of heavily subsidized oil every year, a deal that might evaporate if he dies or fails to win re-election in October.

An oil find, on the other hand, would potentially improve Cuba’s long-bitter relations with the United States, some analysts suggest. They say the U.S. oil industry could lobby Congress to loosen the embargo so it could get in on Cuba’s oil game. At the very least, coordination between the Cold War enemies would be necessary to prepare for any spill that could coat beaches in the U.S. and Cuba with black goo.

The Cuban government has not commented on Repsol’s announcement May 18 that the first well came up dry, and declined to make any oil officials or experts available to be interviewed for this article.

Next in line for using the drilling rig in Cuban waters is Malaysia’s Petronas, which holds the rights to explore an area in the Florida Straits known as the Northbelt Thrust, about 110 miles (180 kilometers) southwest of Repsol’s drill site. Wee Yiaw Hin, Petronas’ executive vice president of exploration and production, told The Associated Press that drilling has begun and he expects results by the end of July.

After that, two industry experts said, Repsol is under contract to drill a second well, though it could get out of the deal by paying a penalty to Saipem, the Italian company that owns the rig. Kristian Rix, a spokesman for Repsol in Madrid, said a decision on whether to sink another well was still being evaluated.

Venezuela’s PDVSA and Sonangol of Angola have options to drill next, but are under no obligation if they don’t like their odds. While both countries are strong allies of Cuba, at $100 million a well, the decision to drill will likely be based solely on economics.

Even if oil is found, the Scarabeo-9 is under contract to power up its eight enormous thrusters and sail to Brazil after that, with no date set for its return to Cuba. The bottleneck highlights the difficulties Cuba faces, and why it could be well into the 2020s before the island sees any oil windfall.

“Assuming they’re successful in finding oil, to bring the oil to market will take years of development efforts,” said Victor Shum, an energy analyst with consulting firm Purvin & Gertz in Singapore.

Once an exploratory well finds oil, companies generally drill between 10 and 20 additional wells nearby to get a sense of the reservoir’s size. The process can take several years even under normal circumstances, and circumstances are not normal in Cuba.

The Scarabeo-9 was built in Asia with less than 10 percent U.S.-made parts to avoid violating Washington’s embargo, making it the only rig in the world that meets the requirement. That means no other rig could be used in Cuba without risking U.S. sanction, and the additional wells would have to be drilled by the rig one at a time, with each taking about 100 days to complete. At about three wells a year, it could take up to six years for this second phase – assuming the rig is available.

After gauging a reservoir’s size, an oil company then must assess whether the economics of a field make it a prime spot for exploitation, or whether to concentrate resources elsewhere.

If exploitation does go forward, complicated equipment is required to pull oil from such depths. Several industry experts said the only country that produces the necessary apparatus is the United States, although Brazil and other countries are working to catch up. Unless they do, the oil could not be removed unless the U.S. embargo was lifted or altered.

“A lot of folks are looking at the energy sector in Cuba because they are looking at a Cuba of five years from now, or 10 years from now,” said Pinon. “So a lot of people are betting that either the embargo is going to be lifted, or the relationship between the U.S. and Cuba is going to improve in some way.”

Still, the benefits of hitting a gusher would be enormous for Cuba, and the impact could be felt long before any oil was pumped.

Because of the embargo, Cuba is shut off from borrowing from international lending institutions, and the island’s own poor record of repayment has left most other creditors leery. Cuba, for instance, owes the Paris Club of creditor nations nearly $30 billion.

An oil find could change the game, with Cuba using future oil riches as collateral to secure new financing, economists say. They point to China and Brazil as potential sources of new funding, but say neither is likely to put money into the island without reasonable confidence they will get their investment back.

Lee Hunt, the recently retired president of the Houston-based International Association of Drilling Contractors, said the stakes are enormous for Cuba that one of the wells hits oil before the Scarabeo-9 leaves. Hunt has worked to bring U.S. and Cuban industry and environmental groups together.

“If the only rig you can work with is gone, it’s like somebody took your shovel away,” Hunt said. “You are not going to dig any holes without a shovel, even if you know the treasure is down there.”

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After 50 years, Cubans hope to travel freely

May 2, 2012 Wednesday 6:56 AM GMT

After 50 years, Cubans hope to travel freely

BYLINE: By PAUL HAVEN, Associated Press

DATELINE: HAVANA

After controlling the comings and goings of its people for five decades, communist Cuba appears on the verge of a momentous decision to lift many travel restrictions. One senior official says a “radical and profound” change is weeks away.

The comment by Parliament Chief Ricardo Alarcon has residents, exiles and policymakers abuzz with speculation that the much-hated exit visa could be a thing of the past, even if Raul Castro’s government continues to limit the travel of doctors, scientists, military personnel and others in sensitive roles to prevent a brain drain.

Other top Cuban officials have cautioned against over-excitement, leaving islanders and Cuba experts to wonder how far Havana’s leaders are willing to go.

In the past 18 months, Castro has removed prohibitions on some private enterprise, legalized real estate and car sales, and allowed compatriots to hire employees, ideas that were long anathema to the government’s Marxist underpinnings.

Scrapping travel controls could be an even bigger step, at least symbolically, and carries enormous economic, social and political risk.

Even half measures such as ending limits on how long Cubans can live abroad or cutting the staggeringly high fees for the exit visa that Cubans must obtain just to leave the country would be significant.

“It would be a big step forward,” said Philip Peters, a Cuba expert at the Virginia-based Lexington Institute. “If Cuba ends the restrictions on its own citizens’ travel, that means the only travel restrictions that would remain in place would be those the United States imposes on its citizens.”

The move would open the door to increased emigration and make it easier for Cubans overseas to avoid forfeiting their residency rights, a fate that has befallen waves of exiles since the 1959 revolution.

It could also bolster the number of Cubans who travel abroad for work, increasing earnings sent home in the short term and, ultimately, investment by a new moneyed class.

Scrapping exit controls should win Cuba support in Europe, which improved ties after dozens of political prisoners were freed in 2010.

But Peters and several other analysts said they doubt the new rules would bring about any immediate shift in U.S. policy toward Cuba, which includes a ban on American tourism. Those restrictions are entrenched and enjoy the backing of powerful Cuban American exiles.

“I don’t think it would lead to a drastic change in U.S. policy, but an accumulation of human rights improvements could lead to an incremental change,”

Peters said.

Cuba-born Rep. Ileana Ros-Lehtinen, a Republican from Florida, said any discussion about immigration reform on the island is a peripheral issue.

“The kind of changes I’m interested in are not about immigration,” said Ros-Lehtinen, who heads the House Committee on Foreign Affairs. “I’m interested in changes that affect fundamental freedom, democracy and respect for human rights.”

U.S. officials said they have been watching for an announcement for months, noting there has been such talk as far back as August. But nothing has happened, and they are skeptical that the Castro regime is truly committed to such reform.

Asked about possible reciprocal measures, one U.S. official said the Obama administration can’t promise anything because it doesn’t know what exactly Cuba plans to announce. The official wasn’t authorized to speak publicly and demanded anonymity.

State Department spokesman Mark Toner said the U.S. “would certainly welcome greater freedom of movement for the Cuban public.”

Rumors of the exit visa’s imminent demise have circulated on and off for years.

The whispers became open chatter last spring after the Communist Party endorsed migration reform at a crucial gathering. But Castro dashed those hopes in December, saying the timing wasn’t right and the “fate of the revolution” was at stake.

Alarcon’s comments, made in an interview published in April, revived hopes that a bold move is coming.

“One of the questions that we are currently discussing at the highest level of the government is the question of emigration,” he told a French journalist. “We are working toward a radical and profound reform of emigration that in the months to come will eliminate this kind of restriction.”

But on Saturday, Vice Foreign Minister Dagoberto Rodriguez told exiles not to set their hopes too high, vowing the government would maintain some travel controls as long as it faced a threat from enemies in Washington.

Havana residents say they are anxiously waiting to see what the government does.

“The time has come to get rid of the exit visa,” said Vivian Delgado, a shop worker. “It’s absurd that as a Cuban I must get permission to leave my country, and even worse that I need permission to come back.”

Added Domingo Blanco, a 24-year-old state office worker: “It’s as if one needed to ask to leave one’s own house.”

Many Cubans are reluctant to talk about their own experience with the exit visa.

One woman named Miru, who has been trying to leave Cuba since 2006, shared her story on the condition her full name not be used for fear that speaking with a foreign journalist could land her in trouble.

“This has been a very long process,” she said of her odyssey, which began when her husband defected from a medical mission in Africa and sought asylum in the U.S.

First, she had to get a letter releasing her from her job at a government ministry a process that took five years. Only then could she apply for the exit visa. That was three months ago, and Miru still hasn’t received an answer.

Officials say her case is complicated but won’t give a specific reason for the delay.

“I am very anxious to see my husband again,” she said.

The exit controls are a Cold War legacy of Cuba’s alliance with the Soviet Union. They were instituted in December 1961 to fight brain drain as hundreds of thousands of doctors and other professionals fled, many for new lives in Florida. That was three months before the U.S. embargo barring most trade with the island went into full effect.

Over the years, it has become much easier for Cubans to obtain permission to travel, though many are still denied, and it is particularly hard to take children out of the country.

Also, the exit visa’s $150 price tag is a small fortune in a country where salaries average about $20 a month. In addition, the person the traveler wishes to visit must pay $200 at a Cuban consulate.

Those who leave get only a 30-day pass, and the cost of an extension varies by country. In the U.S., the fee is $130 a month. Those who stay abroad more than

11 months lose the right to reside in Cuba. Before 2011, any property would automatically go to the state.

“The Cuban government has monetized every part of the humiliating process of coming and going,” said Ann Louise Bardach, a longtime Cuba expert and author of “Without Fidel: A Death Foretold in Miami, Havana and Washington.” “Getting out means running a gantlet, and it is all based on how much humiliation you can endure, and by the time they end up in Miami, people are filled with hate and dreams of revenge.”

Cuban officials have long portrayed the measures as necessary to counter Washington’s meddling. They accuse the U.S. of trying to lure away doctors by letting them walk into any American consulate and request asylum.

Cuban officials say even ordinary islanders are encouraged to leave by U.S.

regulations that automatically grant asylum to any who reach American shores, a policy Cuba says has encouraged thousands to attempt the dangerous trip on leaky boats and makeshift rafts across the Florida Straits.

It’s not clear how emigration reform will affect dissidents, who are routinely denied permission to leave and could still find themselves on some form of no-exit list.

In a recent New York Times opinion piece, dissident blogger Yoani Sanchez called the exit controls “our own Berlin Wall without the concrete … a wall made of paperwork and stamps, overseen by the grim stares of soldiers.” She has been denied travel papers at least 19 times by her own count.

Some hardliners in Florida predict any change will be merely a sleight of hand designed to export malcontents, ease a severe housing shortage and fob off legions of superfluous state workers.

But for hundreds of thousands of Cubans like Miru, the exit visa is a personal matter, not political. After six years separated from her husband, she clings to hope that she will finally obtain permission or benefit from a change in the law.

“I have followed all the rules of my country,” she said. “I’ll be so happy to leave.”

Associated Press writers Andrea Rodriguez and Peter Orsi in Havana, Laura Wides-Munoz in Miami, and Bradley Klapper in Washington contributed to this report.

Follow Paul Haven on Twitter: www.twitter.com/paulhaven

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Cuba legalizes sale, purchase of private property

PAUL HAVEN, Associated Press; Nov. 3, 2011 8:08 AM ET
Original Article available here: Cuba legalizes sale, purchase of private property

HAVANA (AP) — Cuba announced Thursday it will allow real estate to be bought and sold for the first time since the early days of the revolution, the most important reform yet in a series of free-market changes under President Raul Castro.

The law, which takes effect Nov. 10, applies to citizens and permanent residents only, according to a red-letter headline on the front page of Thursday’s Communist Party daily Granma.

The brief article said details of the new law would be published imminently in the government’s Official Gazette. Authorities have said previously that sales will be subject to taxes and the rules will not allow anyone to accumulate great property holdings.

The change follows October’s legalization of buying and selling cars, though with restrictions that still make it hard for ordinary Cubans to buy new vehicles.

Castro has also allowed citizens to go into business for themselves in a number of approved jobs — everything from party clowns to food vendors to accountants — and has pledged to streamline the state-dominated economy by eliminating half a million government workers.

Cuba’s government employs over 80 percent of the workers in the island’s command economy, paying wages of just $20 a month in return for free education and health care, and nearly free housing, transportation and basic foods. Castro has said repeatedly that the system is not working since taking over from his brother Fidel in 2008, but he has vowed that Cuba will remain a Socialist state.

Cubans have long bemoaned the ban on property sales, which took effect in stages over the first years after Fidel Castro came to power in 1959. In an effort to fight absentee ownership by wealthy landlords, Fidel enacted a reform that gave title to whomever lived in a home. Most who left the island forfeited their properties to the state.

Since no property market was allowed, the rules have meant that for decades Cubans could only exchange property through complicated barter arrangements, or through even murkier black-market deals where thousands of dollars change hands under the table, with no legal recourse if transactions go bad.

Some Cubans enter into sham marriages to make deed transfers easier. Others make deals to move into homes ostensibly to care for an elderly person living there, only to inherit the property when the person dies.

The island’s crumbling housing stock has meant that many are forced to live in overcrowded apartments with multiple generations crammed into a few rooms. Even divorce hasn’t necessarily meant separation in Cuba, where estranged couples are often forced to live together for years while they work out alternative housing.

The new law will eliminate a state agency that regulated the exchange-by-barter of homes, meaning that from now on sales will only need the seal of a notary, according to Granma.

The government has also dropped hints in recent months about the new property law, saying it will allow family members to inherit homes even if they are not living in the property.

Cubans who can afford it will be allowed to own one home in the city and one in the countryside.

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