Energy revolution in Cuba continues

Cuba Petroleos (Cupet), the island’s state-run oil company, has just announced that it will begin drilling 24 new wells in 2009 in an effort to expand Cuba’s crude oil and gas production. Cupet’s production currently satisfies only 47% of Cuban demand, leaving a production-consumption gap that has traditionally been covered by imports from Venezuela (although Cuba is seeking close relationships with other oil-rich countries, as well; see the discussion in last week’s post).

But Cuba is effectively demonstrating that it has the capacity to reduce its dependence on foreign oil. In fact, Cupet pegs Cuba’s potential oil reserves—on land and in its Gulf waters—at over 20 billion barrels. If this is accurate, it would make Cuban reserves twice that of Mexico.

French, Chinese, Brazilian, Vietnamese, Spanish, Norwegian, Indian and Malaysian companies are already at work under drilling contracts with Cupet. Moreover, Cuba has passed laws that encourage this foreign investment, and that do not exclude U.S. companies.

Cupet plans to finish 16 of the new wells during the course of this year, and many U.S. companies are looking longingly southward. Will oil be the straw that breaks the embargo’s back?