Venezuelan state oil company Petroleos de Venezuela SA (PDVSA) has formed a joint venture with Cuba’s Cupet to revamp the unfinished Cienfuegos refinery.
“The initial investment will approximately be between $800 million and $1 billion in shared costs,” said Adan Chavez, Venezuela’s ambassador in Cuba. Cupet will hold a 51% stake in the JV and PDVSA the remaining 49%.
The 76,000 b/d, Cienfuegos refinery was built in the years of Soviet influence over Cuba, but the Soviet Union collapsed before the facility became operational.
PDVSA also will supply the refinery with crude and other products needed for its “optimum performance,” while products manufactured at Cienfuegos could be sold within Cuba as well as abroad.
Political gamesmanship
Venezuela has had its eye on an investment in Cienfuegos since Hugo Chavez became president in 1999, and the new JV follows the April 2005 signing of a memorandum of understanding between Chavez and Castro.
If you think this is strictly a deal to optimize oil refining and distribution, then think again.
Following on from his offer to sell below-cost heating oil to selected US cities, Chavez’s Cuban deal is part of a larger political undertaking aimed at diminishing US influence at home and abroad.
That is particularly obvious in Venezuela’s decision to sell its 268,000 b/d Lyondell-Citgo refinery in Texas after Chavez long complained that PDVSA’s US refineries have not been profitable enough.
In fact, according to Chavez, the Citgo refineries have been a bad deal because they buy Venezuelan oil at a discount and pay US taxes.
Razor Hand
Imagine how that makes Chavez feel when he gets up to shave in the morning, especially when he recalls that the US is Venezuela’s top market for sales of crude oil. It’s enough to make his razor hand slip. Worse, perhaps, is the fact that his country remains highly dependent on its US refineries since Venezuelan crudes can be processed only in a limited number of refineries outside the US. As a result, Chavez is actively seeking to increase refining capacity throughout the region: attempting to buy a small Argentine refinery, doubling capacity at a refinery in Uruguay, and laying the cornerstone for a $2.5 billion refinery in Brazil.
Is anyone surprised that Chavez has joined his campaign to boost refining capacity with a wider strategy to gain influence and prestige in the region? Consider his deal with Cuba.
Last week, Cuba’s official AIN News Agency reported that Washington, DC, is so “worried” about the growing relationship between Cuba and Venezuela that it has dispatched ships to the region.
AIN viewed the move as an effort to “show its aggressive military might in this part of the world as if trying to stir up fear.”
While Cuba may soon begin to export refined oil to the region, at Chavez’s bidding it clearly has not forgotten the arts of propaganda, a staple export under Castro’s regime. ✦
