Cuba's Mining and Petroleum Industries: A 2015 USGS Overview

From a U.S. Geological Survey fact sheet by Susan Wacaster, Michael S. Baker, Yadira Soto-Viruet and Steven D. Textoris, National Minerals Information Center, 2015. It describes the situation in 2014 and early 2015.

On December 17, 2014, President Obama announced that the United States would begin talks to restore diplomatic relations with Cuba and move towards normal relations. The United States had cut diplomatic ties in 1961, after Cuba's revolutionary government took power on January 1, 1959, and among other measures cancelled all U.S.-owned mining contracts and expropriated U.S.-owned mining concessions. In 1962 President Kennedy declared an embargo on all trade with Cuba, froze Cuban-owned assets in the United States and banned U.S. public and private investment there, mining included.

On January 15, 2015, the Departments of Commerce and the Treasury amended the Cuba sanctions to match the new policy, but left the restrictions on U.S. investment in mining unchanged. The USGS then gathered what was known about Cuba's mineral industries.

Cuba in brief

• Size: in 2014, more than 11 million people on about 111,000 square kilometres — similar to Ohio.
• Income: in 2010, the latest year with data, GDP per person at purchasing power parity was $10,200, three times less than in Mississippi, the poorest U.S. state by that measure.
• Minerals: in 2013 Cuba was estimated to be among the world's top 10 producers of cobalt and nickel, its leading mineral exports. It also exports ammonia, nitrogen fertiliser and zeolites to Europe and elsewhere in Latin America and the Caribbean, but uses most other mineral products at home. Most processing plants run well below their design capacity, producing too little to export.
• Oil: about one-third of its petroleum demand is met by extra-heavy crude produced onshore and just offshore; since at least 2007 the rest has come from Venezuela. There is no deepwater production.

What lies in the ground

Cuba's complex geology holds a wide range of mineral resources.

• Cobalt and nickel, its most significant reserves, are in laterite soils formed on top of ophiolites — preserved fragments of ocean crust, which also hold chromite.
• Other metals: copper and zinc in volcanogenic massive sulfide deposits, copper in porphyry deposits, iron in laterite and skarn deposits, precious metals in epithermal deposits, manganese oxide in stratabound deposits and tungsten in veins.
• Industrial minerals: bentonite, feldspar and high-purity zeolites of volcanic origin, all mined today; and gypsum, kaolin, lime, high-grade limestone, marble and sand from carbonate rocks. Manufactured products include ammonia, cement, sulfuric acid, steel and urea.

Cuba produces natural gas, crude oil and refined products. Most of its oil and gas comes from structural traps in carbonate reservoirs of the North Cuba fold and thrust belt, onshore and offshore, though oil and gas seeps have been reported in every province. Production is centred east of Havana along the north coast of Matanzas and Mayabeque provinces, mostly at three near-offshore sites run by Canada's Sherritt International Corp.: Puerto Escondido, Varadero West and Yumuri. The largest refinery, Ñico López in Havana, handles domestic and imported oil; the second largest, at Cienfuegos, refines only Venezuelan crude.

A history of U.S. involvement

• Before 1959, Americans could explore and mine in Cuba alone or with Cuban partners. U.S. companies held large mining and oil assets, among them the Moa Bay nickel operation, and ran several refineries.
• Geologic surveys: U.S. geologists documented Cuba's chromium, iron ore and manganese in the early 1900s and sought strategic minerals in both World Wars; from 1916 to 1940 the United States imported more than 720,000 metric tons of Cuban chromite ore.
• After the revolution, the Cuban government took Americans' property by confiscation, expropriation and nationalisation, without compensation. In 1964 Congress (Public Law 88-666) authorised the Foreign Claims Settlement Commission to decide the validity and amount of U.S. nationals' claims, for use in any future settlement, though the law provided no payment.
• Soviet ties: Cuba's trade agreements with the Soviet Union led U.S. companies to stop running their refineries; Cuba nationalised them and developed its mineral industry on its own. When the Soviet Union dissolved in 1991, Cuba's economy collapsed and mining was starved of investment.

Cuba was the world's third-largest nickel producer in 1958, sixth by 1963 and tenth by 2013. It produced 4% of the world's copper in 1959, but no copper production has been reported since 2001.

In 2004 a USGS assessment of the North Cuba basin — the northern half of the island and Cuba's Exclusive Economic Zone in the Gulf of Mexico — estimated undiscovered, technically recoverable resources of 9.8 trillion cubic feet of natural gas, 4.6 billion barrels of crude oil and 0.9 billion barrels of natural gas liquids. About 70% of the oil was thought to lie no more than 50 to 80 kilometres off the western and northern coasts. Companies from Brazil, Malaysia, Russia, Spain and Venezuela have held leasing concessions in Cuba's waters.

Recent developments

• Oil and gas output from onshore and shallow coastal reservoirs is about 50,000 barrels a day of liquids and about 20,000 barrels a day of oil equivalent in gas. Venezuela is a partner in most of the downstream industry through the joint venture Cuvenpetrol S.A.
• Unfinished projects: China won a bid in 2010 to build a refinery at Matanzas and upgrade the terminal for Venezuelan crude, but no start date had been announced by the end of 2014. A Soviet-built pipeline from the Matanzas fields to Cienfuegos has not worked since tests in 1991.
• Deep water: as of 2015, drilling by Spain's Repsol and Russia's Zarubezhneft had found no commercial oil or gas. The far northwestern maritime boundary with the United States and Mexico, the "eastern gap", has yet to be legally settled; it lies beyond the U.S. Exclusive Economic Zone but within waters found to be part of the U.S. extended continental shelf.
• Ferronickel: the Las Camariocas plant in Cupey, begun in the 1980s and about two-thirds built when Soviet financing ended, was taken up again in 2010 by Ferroníquel S.A., a venture of Cubaniquel and Venezuela; startup had been expected in 2013, with no news of progress.
• Fertiliser: Cuba has sought since at least 2010 to expand ammonia and urea production, but projects such as a plant at Calicito in Cienfuegos Province had not started. The Revolución de Octubre plant in Nuevitas reported 65,000 metric tons of nitrogen fertiliser and ammonium nitrate production at the end of 2014, mostly for export. From 2010 through 2013 Cuba imported an average of 8,000 metric tons a year of ammonia and phosphate fertiliser from Egypt, Libya and Morocco.

Foreign investment

Cuba's real GDP was $70 billion in 2013 — small beside the larger regional economies, but above that of similar-sized countries such as Bolivia, the Dominican Republic and Guatemala every year from 1990 through 2013. Law No. 77, the Foreign Investment Act of 1995, opened the door to foreign direct investment, and growth recovered. It stayed constrained, partly by the economy's small size but more by government controls on investment, prices and labour.

• Where it went: mainly agriculture, natural resources and tourism. Cuba received about $3.5 billion from 1990 through 2009, 86% of it from just 20 of about 250 foreign investors. In the 1990s mining was the second-ranked sector, taking on average 15% to 20% of the total.
• Control: foreign partners were given majority control in the 1990s, but from 2011 the government sought a share of 51% or more. The law allows full foreign ownership, yet as of 2011 only six wholly foreign-owned firms operated in Cuba.
• Wages: foreign-invested firms pay wages in hard currency to a state employment agency, which pays workers in local currency — in effect cutting their value by as much as 90%.
• Sherritt International was the second-largest foreign investor, through nickel and cobalt at Moa Bay and other ventures; in 2014 it remained Cuba's largest independent energy producer.

Mining and quarrying were worth $614 million in 2000, 1.4% of GDP, up from 0.9% of GDP in 1993; the value fell to $396 million in 2002 and stayed flat, reaching $434 million (0.6% of GDP) in 2013. Manufacturing grew from $5.8 billion in 1993 to $10.9 billion in 2013, but its share of GDP fell from 18.3% to 15.6% as other sectors grew. Overall industrial production, including farming, has been estimated at about 50% of its pre-1990 level, and merchandise exports were less than 10% of national output in 2010.

Seeking investment

In November 2014 Cuba's Ministry of Foreign Trade and Investment listed 246 projects seeking $8 billion in foreign investment — 86 in petroleum, the largest group, and 10 each in manufacturing and mining. The government said Cuba would remain a state-driven economy dominated by large state holding companies, with most foreign ventures majority Cuban-owned.

• It offered joint ventures in onshore and offshore oil, and aimed to raise renewable electricity from 4% in 2014 to 24% by 2030, inviting investment in biomass, solar and hydropower and allowing full foreign ownership of wind farms.
• All energy output must be sold at set prices to state distributors.

Sources

• Susan Wacaster, Michael S. Baker, Yadira Soto-Viruet and Steven D. Textoris, Recent Trends in Cuba's Mining and Petroleum Industries, U.S. Geological Survey Fact Sheet 2015–3032. https://doi.org/10.3133/fs20153032
• The fact sheet's map of mines and petroleum facilities, drawn with Esri boundary data and a university's concession data, is not reproduced.
• Rewritten in hubnx's own words.