Cuba has authorized the granting of oil concessions to foreign investors and opened the oil and gas sector to the participation of local private companies. The reform is part of a package of 176 economic measures adopted in June to further open the Cuban economy to market mechanisms.
Until now, foreign companies could only work in the hydrocarbon sector through production-sharing contracts concluded within the framework of joint ventures with the Cuban state. The new legislation adds concessions as a separate option, which, according to Pedro Abigonthus, a representative of the Ministry of Energy and Mines, could be more attractive to some investors.
The law also allows national private economic entities to participate in oil industry activities. The goal is to gradually increase crude oil and natural gas production without removing state control over oil resources.
Cuba covers 40 percent of its needs
The reform is being introduced against the backdrop of a severe energy crisis. Cuba produces about 40 percent of the oil it consumes, and the bulk of the output is used to operate seven aging power plants that are the basis of the country's electricity system.
According to Cuban authorities, the fuel purchases from the United States for the private sector authorized since February cover only 3 percent of the country's needs. Washington allows these supplies only for the nascent private sector, while state-owned enterprises and oil industry executives are subject to US sanctions.
Cuba has more than 15,000 small and medium-sized businesses, which employ more than a third of the workforce. It is this sector that will gain access to new opportunities in the oil and gas business.
Havana denies fuel seizure allegations
In parallel with the announcement of the reform, Cuba denied claims by US authorities that 90 fuel shipments seized last week were destined for the island. According to the US side, the cargoes were worth an estimated $3 million and were destined for “Enetec“ - a Cuban state-owned company that has been under sanctions since July.
Jose Figueroa of the US Department of Homeland Security said that the shipments were supposed to “be sent to the Cuban government through a structure sanctioned by the US government“.
“Cuba has nothing to do with this. "We don't even have a contract for these purchases," said Cuban Minister of Energy and Mines Vicente de la O Levy.The new rules should provide additional access to capital and technology as the country tries to increase local production and limit the effects of fuel shortages.
Sources: bta.bg