China group's Cuba oil deal

China group's Cuba oil deal
Marc Frank in Havana, 0:23, Wednesday 24 November 2010

China National Petroleum Corp has won a bid to expand a Cuban oil
refinery in a deal that could be worth as much as $6bn, making it one of
the communist island's largest investments to date.

The refinery, jointly owned by state-owned Cubapetroleo (CUPET) and
Venezuela's Petroleos de Venezuela (PDVSA) is located in central
Cienfuegos province on Cuba's southern coast and forms part of Havana's
efforts to explore for offshore oil.

The refinery will be expanded from its current 65,000 barrels a day
capacity to 150,000 b/d and will eventually include a petrochemical
complex and a liquefied natural gas terminal.

Huanqiu Contracting and Engineering Corp, a unit of CNPC, will be the
manager of the project, which will be financed largely by Chinese banks
and backed by guarantees from Venezuelan oil revenues, people familiar
with the project said.

Chinese construction equipment has begun arriving, with earth moving
scheduled to begin next year, although Cuban projects are often delayed.

None of the parties involved have commented on the deal.

PDVSA is also expected to be one of several companies to drill
exploration wells in Cuba's Gulf of Mexico waters next year, after the
arrival of an Italian-owned but Chinese-built rig that gets around a US
ban on the use of more than 10 per cent of its technology in Cuban projects.

Spanish oil company Repsol YPF (Madrid: REP.MC - news) , Malaysia's
Petronas, Gazprom (GAZP.ME - news) of Russia (OMXR.EX - news) and
India's Oil and Natural Gas Corporation also plan to begin drilling next
year. US oil companies cannot bid for Cuban drilling rights due to the
50-year embargo.

The US Geological Survey estimates that Cuba has about 5bn barrels of
oil offshore, although Havana says it could have 20bn barrels.

Venezuela is now a partner in almost all of Cuba's downstream
infrastructure through the 50-50 joint venture between PDVSA and CUPET,
called Cuvenpetrol, which includes a planned 150,000 b/d refinery in
Matanzas province, east of Havana.

Work has also begun on upgrading Mariel, a large port on the north coast
near the capital.

The Brazilian government has pledged $600m to develop Mariel over the
next four years, and COI, a subsidiary of Brazil's Grupo Odebrecht, has
been working there since 2009 to prepare it as the logistical centre for
offshore oil drilling.

Singaporean port operator PSA International has won a bid to be overall
project manager of Mariel's modernisation, which might include a
container terminal, and it is in negotiations with Cuba's military-run
Universal (Frankfurt: 859669 - news) , people familiar with the matter said.

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