cuba energy report-outlook and perspectives

8/14/2019 Cuba Energy Report-Outlook and Perspectives

1/16

The Cuban Energy Sector

Outlook and Opportunities

Todo nuestro pueblo, todos los trabajadores, todos nuestros jvenes, nuestros

estudiantes. Incluso, nuestros pioneros tienen que tomar conciencia de la energa, de susperspectives futuras. mientras no seamos un pueblo realmente ahorrativo, quesepamos emplear con sabidura y con responsabilidad cada recurso, no nos podremosllamar un pueblo enteramente revolucionario.

Fidel Castro

Our entire country, all of our workers, all of our young people, our students. Even ourpioneers have to be conscious of energy and its perspective futures while we are not a

saving country, which knows how to employ with wisdom and responsibility everyresource, we will not be able to call ourselves an entirely revolutionary nation.

Fidel Castro

Stephen C. Welty

For: Professor Edmilson Moutinho dos SantosNon-Renewable Energy Course

University of Calgary/OLADE

MSc. In Energy and Environment


2/16

Table of Contents

I. Economic, Social and Political SituationA. HistoryB. Population and SocietyC. Political and Economic Framework

1. The Political Outlook2. Economic Outlook

II. The Energy OutlookIII. ConclusionsIV. Bibliography


3/16

HISTORY

The first humans to reach Cuba probably arrived from South America around 3500 B.C.The groups to inhabit the island at the time Christopher Columbus arrived were theGuanahatabey, the Siboney and the Taino Indians. These groups of people were hunters

and gatherers in their earlier periods and then became sedentary peoples. The crops theygrew and subsisted from were boniatos, yucca, yams, corn, pumpkins, peanuts, peppers,avocados and tobacco.

After discovering San Salvador (Watling Island) in the Bahamas, Chrisopher Columbussighted a large land mass that he named Juana that is now known as Cuba. Since theisland offered little gold, the Spaniards turned their attention to Central America andSouth America. The Spanish began colonizing the island around 1512 and created sevenmajor settlements and overtime established an encomienda system that forced natives tolabor for the Spaniards in plantations and mining. Many of the Indians that were notslaughtered during conquest or killed for rebellion were worked to death under the

encomienda system. Another factor for the diminishing of the native populations werenew diseases brought to the island that the native bodies were not prepared to deal with.

Due to the decreasing number of available slave labor, the Spanish began to import slavelabor from Africa. These populations were kept together in tribal groups, which allowedthem to keep some of their African heritage and traditions. During the colonial period theSpanish Crown profited from its ownership of Cuba through cattle ranching, the tobaccoindustry, and sugar cane production. But Cuba also played an important role for theSpanish empire as a transit point for all of the wealth that was scavenged from SouthAmerica and Central America. Because of the large amount of wealth passing through itsports, Cuba became a target for pirate attacks and the ports had to be properly garrisonedto deal with this new threat. Between 1750 and 1800 Cuba was fought over by theimperialist European countries and was under British control for a short period of time.Finally it was returned to Spain under the 1763 Peace of Paris.

Between 1810 and 1825 Mexico and all of mainland South America won independencefrom Spain. Cuba and Puerto Rico were the only remaining Spanish colonies in thehemisphere, despite Simn Bolvars desire to free Cuba as well. Simon Bolivar waswarned to desist by the U.S. government after its declaration that it wished Cuba toremain under Spanish control. During this period, Cuba became the worlds largest sugarproducer, supplying the U.S, Britain, Spain and many other countries. When the Britishbegan to enforce their ban on slave trade in 1862, Cuban businessmen began to importMexican Indians and Chinese laborers to work in sugar cane fields.

From 1868 to 1898, the Spanish ruled Cuba but there were two Cuban rebellions led bysome of Cubas historical figures, namely, Jose Mart, Mximo Gmez, Carlos Manuelde Cspedes among others. In 1897 the U.S. intervened in the civil war leading to theSpanish-American war. The peace treaty was signed on December 12, 1898 in Parisbetween the U.S. and Spain (the Cubans were not invited). In the treaty the U.S. agreedto respect Cuban self-determination but reserved the right to intervene when it deemed


4/16

necessary. For several years, Cuba remained under U.S. occupation and US governorswere appointed. Cuba didnt become an independent republic until May 20, 1902.

The first governments of Cuba were ineffectual, corrupt and discriminatory againstblacks. By 1958 half of Cubas land, industry and services were in the hands of foreign

companies and organizations. Fulgencio Batista was the last president (dictator bymilitary coup in 1952) before the current government of Fidel Castro. Batista and hiscronies had enriched themselves through brides and shady deals with foreign companies.

After a failed revolution in 1953 and some years of imprisonment as a political dissident,Fidel Castro regrouped in Mexico with several revolutionaries and returned to the islandin 1956. After three years of guerilla fighting from the Sierra Maestra mountains, FidelCastro and his revolutionaries won power in 1959. Batista fled to the Dominicanrepublic with US$40 million in government funds.

The first president of revolutionary Cuba was Manuel Urrutia who resigned in less than

one year due to his disagreement with the Agrarian land reform taken out by the thenprime minister, Fidel Castro. All estates over 400 hectares were nationalized whichdirectly affected mostly American companies holdings. Further interactions between theUS government and the new Cuban government led to the nationalization of all Americancompanies including refineries and electricity companies. During these years ofreformation the educational system was brought to a new level increasing the literacyfrom 50% of the population to 90% within a few years. The medical system was alsogreatly improved.

Due to the loss of assets in Cuba, the US severed political ties with the new Cubangovernment and created an economic embargo forcing Cuba to look for other tradingpartners. This led to cooperation between the Soviet Union and Cuba, which eventuallyled to the Cuban Missile Crisis of 1962.

Cuba became increasingly dependent on the soviet bloc countries and in the 70s becamepart of Comecon (the Soviet led Council for Mutual Economic Assistance). Cuba hadcopied many Soviet institutions and the inefficiencies were becoming apparent. By 198887% of Cubas trade was with the Soviet bloc. This dependence on the Soviet bloc costCuba dearly in the early 90s when the Soviet bloc collapsed. Cuba underwent a processknown as rectification of errors whereby the government institutions were restructured

for more efficient operation. President Fidel Castro (became president in 1976) declareda special period for five years as institutions were reformed and the economy tried torecover from the sudden loss of trading partners and increased economic sanctions fromthe U.S.

During this period there were several measures taken to reduce energy consumption andincrease efficiency. Some measures taken were the provision of bicycles to the populacefor transportation and educational programs in efficiency. One such program was thePrograma de Desarollo de las Fuentes Nacionales de Energa which was approved inMay of 1993 and still currently functioning. Today, the Cuban economy has opened up to


5/16

private businesses and foreign investment but continues to be compromised by sanctionsfrom nations with differences in political ideology.

POPULATION AND SOCIETY

Cubas population is a rich mixture of white, black, and Asian (Chinese) races. Most ofthe native Indians were wiped out by conquest, disease and the encomienda system. Thepopulation is about 11 million with the population well distributed throughout the island.One of the goals of the revolution was to prevent the migration to cities similar to whathas happened in other developing nations by increasing the quality of life in rural areas.The largest cities are Havana (2.2 million), Santiago de Cuba (440,000), Camaguey(300,000), and Holgun (240,000).

Since 1959 the Cuban government has had a housing policy preferential to individualownership. Rental properties were nationalized and rental payments were reduced 50%and since 1962 rent payments could not exceed 10% of a families income. Rent

payments were converted to 5 to 20 year mortgage payments and most people own theirown property. The new government also set up a system of volunteer microbrigades tobuild new housing developments after demolishing shanty towns on the outskirts of thecities. This measure not only improved the living conditions of a large fraction of thepopulation but it also helped preserve historical pre-revolutionary buildings in the citycenters. Today, building is limited by the scarcity of materials.

Education and health systems were reformed following the revolution leading to the mostdeveloped and functional systems in Latin America. All citizens are guaranteed freeeducation until the 12th grade and university education is free for selected students. Theliteracy rate is up to 94.5% and the number of rural schools has increased significantlysince the revolution. Women have equal access to education and comprise 42% of thework force today compared to 15% before the revolution also due to crculos infantiles(free day-care centers).

The infant mortality rate is among the lowest in the world at 7.1 per 1000 live births. Thehealth care system is free for all Cubans and 39% of the governments budget in 1999

was dedicated to public health and education.

Another good indicator of a countries social situation is the population pyramid, whichshows pictorially the percentage of the population in different age brackets. Typically,less developed nations have a rapidly increasing population indicated by the largestsegments of the population in the lower age groups. The picture below shows that Cubais not in this condition and that its population profile appears to be more like that of adeveloped nation that has achieved zero population growth and also achieved a goodhealth care system that increases the life expectancy of the population. It should be notedthat some of this phenomenon is due to emigration of citizens to wealthier nations.


6/16

Figure 1: Population pyramid for Cuba in the year 2000 taken from the US Census Bureau

POLITICAL AND ECONOMIC FRAMEWORK

Political Outlook

The Republic of Cubas current president is Fidel Castro and the type of government is acommunist state. Fidel Castro became prime minister in 1959. In 1976, when that postwas abolished, he became president. He is the worlds longest standing leader. The

executive branch of the country is composed of Council of State and the Council ofMinisters. One of Castros roles is as head of both of these institutions. The Council ofStates 31 members are elected by the National Assembly of Peoples Power. The

Council of States president is the head of government and state. The Council of

Ministers 41 members are nominated by the president and approved by the NationalAssembly of Peoples Power.

The 601 members of the National Assembly of Peoples Power are elected every five

years. The National Assembly is the legislative branch of the Cuban government. Theamendment to the constitution in 1972 allowed for direct elections of the members of theNational Assembly by universal suffrage and secret ballot. Half of the candidates arenominated by mass organizations while the rest are chosen by elected municipaldelegates. Only one candidate contests each seat and a 50% majority is required toreplace the delegate. The country is divided into 14 provinces and each province as aprovincial assembly whose candidates are elected in much the same way as the NationalAssembly. In contrast, the municipal assemblies are elected with several candidates foreach seat. The Judicial Branch of the government is composed of The Peoples supreme

court whose official are elected by the National Assembly.

The only political party in Cuba is the Communist party. It was formed in 1965 bycombining previously existing parties and the guerillas who participated in the revolutionin 1959. There are harsh prison penalties for individuals or organizations attempting toundermine the government and the party. The party controls several mass organizations


7/16

such as the CDR (Defense of the Revolution Committees) and the CTC (Confederation ofCuban Workers). Contrary to many claims, a large majority of Cubans are eitherinvolved in the government or are supportive of it and the government has good reasonnot to allow opposition parties or free elections because such opposition would certainlyget a great deal of U.S. support and Cuban expatriate support. Such an environment

would destabilize the country and allow a great deal of foreign input into the countriesdecision-making activities and policies.

The advantage of such a governmental structure in terms of the energy sector is that widesweeping and far ranging planning decision can be made and implemented. Cuba is atthe forefront of sustainable development among developed and developing nations. Theimportance of the power to be able to make long term planning decisions and programscannot be underestimated in terms of sustainable development. Cubas success inimplementing a functional social welfare and educational system speaks for itself andbrings into question the wisdom of espousing only one type of political and economicsystem for all situations as the U.S. government has done.

During the 1990s, the Cuban government has opened its doors to foreign companies inlarge-scale projects such as oil exploitation and telecommunication systems. A largenumber of European and Canadian companies have begun to do business with Cubadespite the Helms-Burton Act, which threatens US action to penalize such companies fordoing so. American executives have begun to hold talks with Cuban officials forpotential future business agreements despite the State Departments discouragement ofsuch talks. All American companies are prohibited from doing business with Cuba.

Economic Outlook

The Cuban economy is very different from most of the economies of the rest of theworld, which makes it especially difficult to analyze the economy using conventionaltechniques. These difficulties were analyzed by Nicols Snchez and Miles Cahill intheir paper entitled The Strengths and Weakness of Factor Analysis in Predicting CubanGDP. A number of economists from the United States have been sent to Cuba to reporton the economy and are many times surprised by the lack of resources but the fact that allbasic needs are met and there is still money for rum and dancing. In the CIA World FactBook, the per capita GDP of Cuba for the year 2000 was estimated to be $1,700.

The average wage of a Cuban is 190 pesos, which with todays exchange rate of 27

pesos/dollar is only about US$7 per month. However, Cubans pay 6% to 10% of theirsalary, regardless of what they earn, for rent and many Cubans own their homes. All ofthe basic necessities are heavily subsidized by the government and paid for in pesos. Itmust also be taken into account that all medical care and education are free. EveryCuban receives a ration card that gives them access to an allotment of rice, beans, eggs,milk and other goods from the bodegas (government stores). The prices of these goods

are in pesos and heavily subsidized by the government. Despite the fluctuations of thepeso on the international market, these prices have remained constant for years.


8/16

The sources of foreign currency in Cuba are tourism, sugar cane industry, nickel mining,and tobacco. Before the revolution 70% of the nations trade was with the United Statesbut after nationalizing many US industries, trade with that nation dropped to 4% by 1961.The USSR took over as the most important trading partner buying 81% of its exports andsupplying 61% of it imports by 1990. The fall of the soviet bloc caused serious economic

hardship for Cuba forcing them to restructure their economy. Today Cuba has diversifiedits trading partners with the most important being: Russia (only 18% of exports today),Canada, The Netherlands, Spain, France, China and Mexico.

During the 1990s Cubas lack of petroleum led to a policy of importing thousands ofbicycles from China to replace gasoline powered transportation. From 1991 to 1995, thenation reduced its energy consumption by half. This also led to greater efforts put into thenational petroleum company and by 1998 Cupet was pumping 1.68 million tons of heavycrude oil. Today the electricity use of Cuba is growing two to three times as fast as GDP.

The Cuban government has allowed a number of joint ventures (350 in 2000 worth about

US$2.6 billion) to provide services and supply goods for its population. Joint Venturesare common in the energy industry, telecommunications industries, tourism, mining andagriculture. The only areas not open for joint ventures are national defense, health andeducation.

The government has also allowed for individual businesses owned by Cubans. Thegovernment was forced into this position by a combination of its policy of 0%unemployment and the fact that it had to lay off a number of workers from governmentcompanies to improve efficiency and avoid financial collapse. These new business aresubject to high taxation and many government regulations. To avoid an emergingcapitalist class, it is forbidden for Cubans to higher employees for their businesses.

Figure 2: Taken from The State of the Cuban Economy.

The graph in figure 2 shows the change in GDP from 1985 to 1995. It is clear that thefall of the Soviet block from 1988 to 1993 had a disastrous effect on the Cuban economybut after 1993 the economy began to recover. Other sources estimate that the increase inGDP in 1996 was 7.8%, in 1997 it was 2.5% and in 1998 it was 1.2%. At this rate ofrecovery it would take the country 10 years to recover to its 1988 level. The budget


9/16

deficit has been reduced from 33% of GDP in 1993 to 2.5% in 1998 due to thegovernments action for rectification.

ENERGY OUTLOOK

Cuba is one of three Caribbean nations with a significant gas and oil production. Theother two nations are Barbados and Trinidad and Tobago. The graph in Figure 3 showsthe natural gas production of the three nations from 1980 to 1999. It is clear that since1996, Cuba has made an effort to increase its natural gas production.

Figure 3: Taken from EIA

Figure 4: Taken from EIA

The graph in figure 4 shows the oil production of these three nations and again a trendcan be seen in the increase of Cuban oil production since 1993.


10/16

Net Electricity Generation [TWh]

0246810

12141618

Arub

a(NE

TH)

Baha

mas,Th

e

Barbad

osCuba

Domini

canR

epublic

Guadelo

upe(FR

)Ha

iti

Jamaica

Martiniqu

e(FR

)

Nethe

rlandsA

ntille

s(NE

TH)

Puerto

Rico

(US)

Trini

dadandT

obag

o

VirginIsl

ands

,U.S.

TW

h

Figure 5: Net Electricity Generation for the Caribbean region. Data from EIA

The graph in figure 5 shows the amount of net electricity generation for the region. Thelargest electricity producers are Cuba and Puerto Rico with 14.5 TWh and 16.5 TWhrespectively.

Caribbean Primary Energy Consumption 1999

0.00

20.00

40.00

60.00

80.00100.00

120.00

140.00

Baha

mas,Th

e

Barbad

os

Cuba*

Dominic

anRepublic

Guadelo

upe(FR

)

Haiti*

Jamaica

*

Martiniqu

e(FR

)

Nethe

rland

sAntille

s(NE

TH)

Puerto

Rico

(US)

Trini

dadandTo

bago

VirginIsl

ands

,U.S.

Energy[TWh]

Other

Coal

Natural Gas

Petroleum

Figure 6: Caribbean Primary Energy Consumption for 1999; Data taken from EIA

Figure 6 shows the primary energy consumption for the region in 1999. Cuba andTrinidad & Tobago are the largest consumers of primary energy in the region but Cubahas a much higher dependence on petroleum whereas Trinidad and Tobago dependheavily on natural gas. Puerto Ricos petroleum consumption is about the same as

Cubas. However, the values in graphs 5 and 6 must be compared to the population of


11/16

each nation to get a more indicative value of energy consumption per capita. Thepopulation of Puerto Rico in 2000 was 3.81 million and the population of Trinidad andTobago in 2000 was 1.36 million. The primary energy consumption per capita per yearfor Puerto Rico, Trinidad and Tobago and Cuba is 28MWh, 87MWh, and 10MWhrespectively. From the values in figure 5, assuming all electricity generated is consumed

within the country (a reasonable assumption for island nations), the electricityconsumption per capita per year for Puerto Rico, Trinidad and Tobago, and Cuba is 4330kWh, 3676 kWh and 1318kWh respectively. Another valuable comparison is to compareGDP per capita with energy consumption to gauge the efficiency of a nation in runningits economy or indicate the kind of economic activity. The year 2000 per capita GDPsof Puerto Rico, Trinidad and Tobago and Cuba are US$10,000, US$9,500, and US$1,700respectively and the resulting Energy/GDP for the three nations are 2.8kWh/$, 9.2kWh/$,and 5.9kWh/$ respectively. Larger values of Energy/GDP suggest less efficient systemsand resource extraction economies or energy intensive industries whereas the lowervalues indicate a more services oriented economy and more efficient processes. Anobvious weakness of this approach is the difficulties in predicting the actual GDP for

nations such as Cuba.

0

100000

200000

300000

400000

500000

600000

Aruba(NET

H)*

Cuba

Dominic

anRepublic

Jamaica

Martiniqu

e(FR

)

Nethe

rland

sAntille

s(NE

TH)

Puerto

Rico

(US)

Trini

dad&To

bago

U.S.

VirginIsl

ands

Barrels/day

Figure 7: Crude Oil Refining Capacity for Caribbean Nations for 2000. Taken from EIA data.

Cuba has the third largest crude oil refining capacity of the Caribbean nations as can beseen from figure 7. The major refineries are in Cienfuegos (76,000 b/d), ErmonosDias/Santiago(101,500 b/d), Niko Lopes/Habana (121,800 b/d), and SerhioSoto/Cabaiguan (2,100 b/d). Most of the crude oil produced in Cuba is heavy oil withhigh sulfur content. This kind of oil is best used in thermal electricity plants and a greatdeal of the hydrocarbons used in the transportation sector is imported as refined product.In 1999 51% of the oil used in the electricity generating plants of the Unin Elctrica


12/16

came from national crude as opposed to 1% in 1989. The national crude oil is also goodfor the cement industry and in 1999 supplied 97% of the crude oil for that industry asopposed to 9% in 1989. It is estimated that by 2003, 100% of the electricity consumptionof the nation will be supplied by national sources with the modification of electricityplants to take national crude and the increasing use of natural gas.

Proven Reserves as of 1/1/01 Production

Crude Oil

(1,000 barrels)

Natural Gas

(billion cubic feet)

Oil (crude, liquids,

refinery gain)

(1,000 barrels per day,

2000)

Natural Gas(billion cubic feet,

1999)

Barbados 2,508 5 1 1

Cuba 283,500 636 42.75 17.7

Trinidad & Tobago 686,000 21,351 125.16 414

Total 972,008 21,992 168.9 432.7

Table 1: Proven crude oil reserves and current production for Caribbean nations. Taken from EIA.

Table 1 shows the proven reserves and current production for the three oil-producingnations of the Caribbean. At current oil production rates, Cuba would have 18 years ofoil production with current proven reserves while Trinidad and Tobago would have 15years and Barbados would have 6.9 years. Clearly there is a greater potential forincreasing production and exploration in Cuba and Trinidad and Tobago. This doesntinclude any potential new finds in unexplored areas. In Cubas case, if the embargo

were lifted, there would be a potential for US business to expand their operations into thewaters surrounding Cuba and would also remove any risks of action by the USgovernment to other foreign firms from the Helms-Burton Act. The location of Cubasreserves is ideal for the American market. The gas situation is even more advantageous

since the transportation of natural gas is more expensive than the transportation of oil.Gas pipelines could be constructed to Florida, supplying a growing market there. Apipeline of 0.72 bcf/d to Florida would represent a business of US$300 million per year.In 1995 the Cuban National Assembly ratified the Law for Foreign Investment, whichmakes oil exploration and production very attractive for foreign investors. Cuba hasrecently opened up 59 blocks for exploration by foreign oil firms. Sheritt International(Canada), Repsol YPF (Spain), and Petrobras (Brazil) are some of the major firmscurrently in the oil business in Cuba.

Figure 8 compares the amount of crude oil imported in 1989 to 1998 as percentage of thetotal consumption. In 1989 42% of the crude oil was imported and only about 2% was

nationally produced crude oil. In 1998, however, those figures changed to 15% of crudeoil imported to 17% of crude oil from national production. The biomass generation,mostly from bagase, remained relatively constant between the two periods at about 28%percent of national consumption. The largest change between the two periods was theincrease from 21% to 40% importation of refined petroleum products. The main reasonfor the increased importation of refined products is the international market andsuppliers conditions.


13/16

Figure 8: The structure of energy supply for Cuba. Taken from Consideraciones sobre el Sector

Energtico Cubano

The energy intensity of a nation over a period of time indicates the trends in the countriesuse of energy. The graph in Figure 9 shows the general trends of energy use in Cuba.From 1989 to 1993 there was a decrease in the energy intensity of the island nation basedon the failing economy. Fewer products were produced from the cement industry, sugarindustry and most of the industries leading to a decrease in overall energy consumption.In the next period from 1994-1997 their was a marked increase in the energy intensitylargely due to the increase of economic activity in the traditional export industries whichare high in energy consumption. There was also an increase in the commercial andresidential sectors. The improvements in energy efficiency in this period did not lead to adecrease in energy intensity because of the increased economic activity and the growth ofGDP. In the next period from 1998-1999 the 300 million dollars invested in energy

savings programs and energy efficiency (during the period from 1995 to 1999) began topay off and the energy intensity of the island nation began to decrease sharply while theGDP continued to grow.

Figure 9: The dynamic of energy intensity for Cuba (year 1989=1). Taken from Consideraciones

sobre el Sector Energtico Cubano.

During the year 2000 this trend continued and there was a noticeable decrease in theoverall consumption of energy with an increase in GDP due partially to the


14/16

improvements in energy efficiency in all sectors of the economy and the increase inservice related industries such as tourism. Despite the achievements in energy efficiencyover the last decade, the government continues to put a high priority on the rational use ofenergy. In April 2001, the Cuban government launched its Cuban Energy SavingsProgram that will audit and engineer changes in industry and residential sectors to reduce

electricity consumption. Many aging energy plants are being refurbished with the help offoreign companies.

Rational use of energy is not limited to energy efficiency. One example of irrational useof electricity is the use of electricity for cooking and heating. Usually the electricity isgenerated from thermal power plants, transported to the end user in the form ofelectricity, and then reconverted to thermal energy. The Cuban government focused itsresidential programs of rational use of energy on issues such as supplying homes withnatural gas for cooking and heating for direct use of the thermal energy. In many homesthis meant substituting natural gas for kerosene, which helped to decrease harmfulemissions and improve indoor air quality. The economic incentive for substituting

kerosene is the decreased use of kerosene in the international economy. Many timesCuba had to import jet fuel to use for kerosene because of its lack of availability. Otheractions were to increase the energy efficiency of refrigeration and illumination.

In the industrial sector the government began a program of charging for electricity in USdollars to account for the actual cost of energy. This led to a change in the behavior ofindustries and a real economic incentive to practice energy efficiency. At the end of theyear 2000, 70% of state companies were paying the actual cost of electricity in USdollars. Other measures include encouraging foreign investment to bring industries up tothe state of the art in technology. This is done through BOOT (Build Own Operate andTransfer) schemes where the business is owned by the foreign investor for a period oftime agreed to by both parties and then transferred to the Cuban government.

Cuba has also undertaken a program to improve the transmission of electricity. Thisincludes reducing the line losses and accounting for non-metered usage of electricity. Tosupport such activities, an anti-fraud program was formed and the appropriate legalsupport for the program was instituted.

They have also instituted programs for the research and development of renewableenergy sources. Many rural locations away from the grid have been provided electricitywith wind and solar power. Micro-hydro is also in use in the country. Cubasolar is theinstitution in charge of renewable energy development on the island and has beenactively involved in the practical use and installation of systems throughout Cuba. Aninitial project of electrifying rural schools and doctors offices with wind and active solar

has been remarkably successful. Aside from biomass from the sugar cane industry,renewable energy continues to contribute only a small percentage of the total energyconsumed.

In 1982, the Russians initiated the construction of a nuclear power plant in Juragu butwork stopped when the Russians withdrew their subsidies. The plant is 75% finished but


15/16

requires another US$750 to complete. The plant was to have four reactors, each with acapacity of 416 MW. The plant would have generated 1664 MW, which would havebeen approximately 50% of the electricity generated in 1998. This plant would havesaved the Cuban government 600,000 tons of oil annually for each of the four reactors.Cuba and Russia have talked about continuing construction but in 2000 they both agreed

to abandon the project.

CONCLUSION

The Cuban situation is quite unique in that it has very high potential for economicactivity in the energy industry, it has an ideal location close to a very large market, but itis plagued by an embargo because of its ideology (The Cuban government is willing toindemnify American business that lost assets during the nationalization process but theUS government is unwilling to talk). It is one of the most developed of the developingnations in terms of social welfare and quality of life. It is among the first nations in the

world to pioneer and apply sustainable development encouraging and funding energy

efficiency and rational use of energy.

Until recently, business in Cuba was not attractive for foreign investors but withmodifications in the Law in 1995, it is increasingly attractive for foreign investors to dobusiness in Cuba despite threatened action from the US government to foreign businessescooperating with the Cuban government. The main areas for investment are in the oil andgas industries as well as in energy efficiency projects in the industrial sector of theeconomy.

Cubas success in the moving towards sustainable development clearly demonstrates the

need for strong and decisive government involvement in the process. The governments

role includes passing legislation, offering tax incentives for sustainable development,offering free or subsidized education in sustainable development areas, and providingfunding for the development of new technologies and methods.

The future of the Cuban energy sector lies in the rational use of energy, increaseddomestic oil and gas production, the increased use of natural gas to replace oilderivatives, and the increased use of renewable energy. The trends in these areas havebeen discussed in this paper and all indications suggest the trend will continue and evenincrease in the coming years.

If the embargo on Cuba were to be lifted, it would multiply the economic recovery rate.If current government policies continue and the funds are made available for itsambitious plans, Cuba would fall into a category of its own in terms of sustainabledevelopment and social well being. Most of the governments policies in the energy

sector are also good for the environment and since many of its oil production facilities arenear large tourists resorts, a concerted effort has been made to minimize theenvironmental impact of this activity.


16/16

BIBLIOGRAPHY

Caribbean Fact Sheet, May 2001, U.S. Energy Information Agency.www.eia.doe.gov/emeu/cabs/carib.html

Jaffe, Amy Myers. Et al. The Potential for the U.S. Energy Sector in Cuba. CubaPolicy Foundation. www.cubapolicyfoundation.org/ pdf/jaffesoligo_energy.pdf. 2001

Rodrguez Castelln, Santiago. Consideraciones sobre el sector Energtico en Cuba.

Centro de Estudios de la Economa Cubana.www.uh.cu/centros/ceec/. Aprox 2001.

CIA- The World Fact BookCuba.www.cia.gov/cia/publications/factbook/geos/cu.html

Snchez, Nicols; et al. The Strengths and Weaknesses of Factor Analysis in PredictingCuban GDP. Cuba in Transition. ASCE. 1998.

Mesa-Lago, Carmelo. The State of the Cuban Economy: 1995-1996 Cuba in TransitionASCE. 1996.

U.S. Census Bureau. http://www.census.gov/ipc/www/idbpyr.html

Republic of Cuba. The Oil Industry in Cuba: A New Horizon. Cubapetroleo. Habana,Cuba, 1997.

Comisin Nacional de Energa. Programa de Desarollo de las Fuentes Nacionales deEnerga. Cuba, Premium Publicity. June, 1993.

Stanley, David. Cuba. Lonely Planet Publications. Victoria, Australia. July, 2000.
http://www.uh.cu/centros/ceec/http://www.uh.cu/centros/ceec/http://www.uh.cu/centros/ceec/http://www.cia.gov/cia/publications/factbook/geos/cu.htmlhttp://www.cia.gov/cia/publications/factbook/geos/cu.htmlhttp://www.cia.gov/cia/publications/factbook/geos/cu.htmlhttp://www.cia.gov/cia/publications/factbook/geos/cu.htmlhttp://www.uh.cu/centros/ceec/

cuba energy report-outlook and perspectives

Documents