Cuban refinery cuts production in half because of drop in Venezuelan oil

Cuban refinery cuts production in half because of drop in Venezuelan oil
BY NORA GÁMEZ TORRES AND MARIO J. PENTÓN
ngameztorres@elnuevoherald.com

The oil crisis in Venezuela has struck at the center of Cuba.

The drop in Venezuelan oil deliveries to the island has led to a major
cut in production at a refinery in Cienfuegos managed by the two
countries, a Cuban Communist Party official has confirmed.

Lidia Esther Brunet, the party's chief for Cienfuegos province in
central Cuba, said production this year at the Camilo Cienfuegos
refinery — built during the Soviet era — has been cut by half. And plans
to build an adjoining petrochemical complex with Venezuelan investments
have been put on hold, she added.

"The arrival of crude to be processed in our refinery has in fact been
limited," Brunet was quoted as saying by China's Xinhua news agency.
"This year it will not meet the established target, which it did every
year since … [2007] and the reasons are known — the issue of contract,
the issue of Venezuela and other issues."

Brunet said the refinery would process about 9.43 million barrels this
year, barely 53 percent of its target.

The cut in production could mean the loss of jobs for hundreds of
employees in a province with little else to offer in an already
struggling economy.

"Right now it is not processing Venezuelan crude. The deliveries dropped
substantially since last year," said one refinery employee who asked for
anonymity to speak frankly about the problem.

Another employee told el Nuevo Herald that the refinery has been
processing crude from Algeria. "The situation is not stable. We started
up again Sunday, but sometimes you stop and start again. We're all
afraid that in the end we will wind up without a job. That would be a
tremendous blow," the employee said.

Luis Morillo, general director of the Cuba operations for PDVSA,
Venezuela's state oil monopoly, announced in July that the refinery
would be partially closed "for maintenance" for periods totaling three
months over the remainder of the year.

"The statements confirm what was already announced. Cienfuegos is not
operating, but not because of technical problems. Rather, Venezuela does
not have enough medium crude to send to the Cuban refinery," said Jorge
Piñón, interim director of the Center for International Energy and
Environmental Policy at the University of Texas at Austin. "It's not so
much Cienfuegos. It's Venezuela."

Piñón, who has been monitoring the movement of oil tankers in the
Caribbean area, said that the announcment also confirms the reduction of
Venezuela supplies to the refinery. "There's been almost no traffic to
Cienfuegos in the last three or four months," he said.

The refinery's expansion plans included increasing its processing
capacity to 150,000 barrels per day, the construction of a plant for
olefins and aromatics, an expansion of its storage capacity and the
reactivation of a pipeline from Cienfuegos on Cuba's southern coast to
Matanzas on the northern coast.

"The word among refinery executives is that the joint venture
[Cuvenpetrol S.A.] could be closed because of the economic situation in
Venezuela, and Cuba would then wait for another country to take on the
49 percent investment," said one of the refinery employees.

"The big problem is that the refinery has never been profitable because
that would have required a series of investments … that were never
made," added the employee. "There's been no staff reduction so far, but
it's on the way."

More than 500 people currently work at the refinery. Official figures in
2010 stated the refinery employed 780 people.

The drop in Venezuelan oil deliveries has not been felt more strongly in
Cuba because Havana has imported oil from other sources, which is
largely arriving at the port of Matanzas, Piñón said.

Cuban Foreign Trade Minister Rodrigo Malmierca on Monday acknowledged
that the island's economy, hammered by the Venezuelan crisis, would not
achieve the government's prediction of 1 percent growth in Gross
Domestic Product this year.

Over the summer, the government announced cuts in electricity and fuel
supplies, primarily at state enterprises. The central government
assigned tight quotas to each enterprise and warned that if they went
over, they would be forced to shut down and send employees home "on
vacation."

Part of the fuel supplied to state enterprises regularly winds up on the
black market, sold to private vehicle owners. The prices of private
transportation such as taxis and trucks have risen since the new quotas
were established.

Cuban ruler Raúl Castro acknowledged the drop in Venezuela's oil
supplies during a speech in July but gave no details. Piñón has
estimated it at 25 percent, and the Reuters news agency, quoting
internal PDVSA data, put the drop during the first half of 2016 at 40
percent.

The mutual cooperation agreement between Venezuela and Cuba to exchange
oil for medical services was signed 16 years ago.

The Cuban government has not reported its domestic oil production or
refinery statistics for 2015.

Source: The oil crisis in Venezuela has struck at the center of Cuba |
In Cuba Today - http://www.incubatoday.com/news/article112094082.html