After the announcement of Fidel Castro's exit stage right as the 50-year leader of Cuba, analysts are scrambling to get a fix on what the change will mean for the Cuban economy, as well as the economy of U.S. oil and gas companies that could possibly benefit from the change in power.
An Oppenheimer news analysis stated that the power shift to Raul Castro would "open up the economy," claiming that Raul, Fidel's younger brother, has been in the shadow of his older sibling over the past year-and-a-half while acting as the interim leader.
For the people and the government of Cuba, there is a "huge demand for change." Since the big discovery in 2006, Cuba has been auctioning offshore blocks to foreign companies like Repsol YPF and Sherritt International for joint venture exploration projects with the Cuban government.
Meanwhile, U.S. companies missed out on the Cuban oil rush due to the long-standing embargo the U.S. has had on Cuban products.
In January 2007, Cuba and Venezuela signed exploration agreements for Cuba's section of the Gulf of Mexico. Perhaps Cuba's closest ally, Venezuela is a major contributor to the Cuban economy. Venezuela supplies Cuba with one-third of its oil.
Mike McConnel, the director of the U.S. Department of National Intelligence, said Feb. 6 that "the determination of the Cuban leadership to ignore outside pressure to carry out significant economic and political reform continues to be reinforced by the more than $1 billion net annual subsidy that Venezuela provides to sustain Cuba.
"Both governments depend heavily on this special bilateral relationship … Chavez will continue to seek to unite Latin America, under his leadership, behind an anti-US, radical leftist agenda and to look to Cuba as a key ideological ally."
Cuba imports about 100,000 bbl/d to sustain its consumption of oil. Cuba and its foreign partners currently produce around 68,000 bbl/d, which is up from the 18,000 bbl/d produced in 1992. And the number of barrels produced could very soon grow even larger.
The U.S. Geological Survey estimates reserves of 4.6 billion barrels of oil and 9.8 trillion cubic feet of gas offshore Cuba. Industry analysts say the sites would be difficult and expensive for further exploration and production.
In 2005, U.S. Congress was even being pushed to end the embargo on Cuba, at least for energy producers, so that U.S. oil and gas companies could get in on the discovery bonanza, but the effort did not win out. Some say that another huge discovery offshore Cuba could change the minds of Congress.
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