As if tensions between the United States and Russia were not high enough, the Russian government-owned oil corporation Rosneft is now seeking a major oil deal with Cuba. At the World Petroleum Congress in Moscow, Rosneft met with Cuban Deputy Minister of Energy and Mines, Ruben Cid, to discuss new oil fields right in America's backyard.
Cid told Itar-Tass, "Talks with Russian oil corporations are underway at the moment. The Director General of our national oil company CUPET, Juan Torrez Naranjo, and Rosneft President Igor Sechin signed a memorandum recently in St Petersburg, under which the two companies will do the joint development of oilfields on the Cuban continental shelf.”
If the deal continues, it will mean two government-owned oil companies with roots in communism will build a meaningful business relationship. Cuba has oil reserves of somewhere between four and 20 billion barrels. CUPET estimates 20 billion, whereas the United States Geological Society has a more modest estimate of four-to-nine billion barrels.
Right now, oil is priced around $110 per barrel. This is quite a lucrative deal, comparable even to the $900 billion deal Rosneft currently has underway with Exxon Mobil. In that arrangement, Arctic drilling should bring in nine billion barrels of oil.
The contract CUPET is proposing to Rosneft will allow oil production in deep waters and areas not belonging to the United States. Cid explains, "Production in deep waters is expensive enough and that's why to attract investors there is a much more painstaking job. In this respect, we pin hopes on our partners from Venezuela and Angola, as well as on Rosneft. Hopefully this contract will be signed."
It is in Cuba's best interests to execute the deal, and because they cannot work with American oil companies due to the longstanding embargo, Rosneft is the logical company to approach. Currently, there are only four wells in Cuba, so the Cuban oil reserves have not been properly prospected. This is partially why it is difficult to determine how much oil there really is.
When it comes to oil, politics are secondary and profitability is by far superior. If CUPET's 20 billion barrel estimation proves accurate, the arrangement will be double in size to the Exxon/Rosneft Arctic deal. Exxon Mobile CEO Rex Tillerson spoke on the same panel as sanctioned Rosneft executive Igor Sechin at the World Petroleum Congress this week.
Russia has been, thus far, relatively unfazed by U.S. sanctions and the upsetting of ties with the States. Because of the potential profitability of this deal and Russia's generally nonchalant attitude towards the U.S., the CUPET contract may very well be signed and executed quickly. As the old saying goes, the enemy of my enemy is my friend.