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02/10/13 - Reuters - Amid uncertainties, Cuba seeks funding for refinery expansion

* Chinese had been expected to fund, build expansion
* Chavez' health has raised oil supply doubts
* Cuba still hoping to find offshore oil

By Jeff Franks

HAVANA, Feb 10 (Reuters) - Cuba is looking for someone to finance a $6
billion expansion of its largest refinery, in the city of Cienfuegos, amid
uncertainties about China's role in the project and the future of its close
ally and oil supplier Venezuelan President Hugo Chavez.

Ricardo Caballero, chief executive of Cubvenpetrol, a Cuba-Venezuela joint
venture running the refinery, said this week the finishing touches are
being put on a proposal to present to possible international financiers,
but there was "no predetermination" of who would foot the bill and there
had been no talks with anyone about it.

"In this moment, we are just now finishing the stage of definition of the
refinery. You can't talk with anyone about financing until you finish
defining the project," he told reporters at the refinery.

The plan calls for expanding capacity from 65,000 barrels per day to
150,000 and building a liquefied natural gas plant. Once funding is
obtained, it will take 45 months to complete the project, said Caballero, a
veteran of Cuba's oil industry.

People involved in the expansion said more than two years ago China would
build and finance the project, with the money backed by Venezuelan oil.
But the deal has never taken wings.

Nothing has been disclosed publicly and the Chinese have been mostly silent
on the matter. However, sources say China has never signed a final
agreement due to questions ranging from Chavez' health to future oil and
natural gas supplies to whether the project will be built by Chinese or
Cuban workers.

China signed a letter of intent for the project in 2011, but Caballero said
the Chinese are only serving as principal contractors to develop, along
with the Italian unit of French company Technip, basic engineering for the
expansion.

"They accompanied us during everything. They are still with us during this
final stage," he said.

BUILT BY SOVIET UNION

The refinery, its silvered towers rising up from scrublands along
Cienfuegos Bay, was completed in 1990 by the Soviet Union when it was
Cuba's top ally.

At the same time, the Soviets built a pipeline from Matanzas on the
northern coast down to Cienfuegos in the south to transport oil from its
supertankers to the plant.

The Soviet Union collapsed in 1991 and with it went Cuba's oil supply. The
Cubans used the refinery sparingly because they could only intermittently
get oil from other sources and after 1995, they shut it down.

The pipeline from Matanzas was used only once, in a 1991 test, Caballero
said. Since then, it has been filled with water and preserving liquid, and
there are no plans to use it again. Oil for the refinery comes in via
tankers from Venezuela.

The refinery did not reopen until 2007, after Chavez, who is now Cuba's
closest ally, funded a refurbishment of the facility and guaranteed a
steady supply of oil.

Venezuela sends 115,000 barrels a day to Cuba on highly favorable terms
that include a barter arrangement for the services of more than 40,000
Cuban professionals, most of them doctors and other medical personnel.

Chavez, 58, is recovering in Havana two months after his fourth surgery for
cancer, described only as being in the pelvic region. He has not been seen
or heard from publicly since the six-hour operation on Dec. 11.

Although Venezuelan officials say Chavez is improving, there are doubts
about his future, and, consequently, about the future flow of Venezuelan
oil to Cuba.

Caballero downplayed the possibility of a change in Venezuela's oil policy,
expressed confidence in Chavez' recovery and said all oil for the refinery
will continue to come from Venezuela, even if the expansion becomes a
reality.

That could change if Cuba realizes its hopes of finding large oil deposits
off its northwestern coast, where it says 20 billion barrels of oil may be
waiting.

So far, four wells have been drilled in Cuban waters, three of them last
year, with all coming up empty. Russia's Zarubezhneft is currently drilling
another.

"Undoubtedly if oil appears (there), many doors are going to open,"
Caballero said.

If Cuba cannot get financing for the full project, he said the plan would
be to expand gradually.

In the meantime, tests are underway to see if the refinery can run at up to
80,000 barrels per day, which Caballero said was possible because the
Soviets "over designed" projects.

Despite the uncertainties, Cienfuegos officials showed reporters a
1,500-unit apartment project going up to house an expected 5,000 workers to
build the expansion.

If the refinery plans do not come to fruition, they said the apartments
could be used by favored Cubans, such as star athletes and doctors.
(Reporting By Jeff Franks; editing by Christopher Wilson)

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Original Source / Fuente Original:
http://www.reuters.com/article/2013/02/10/cuba-refinery-idUSL1N0BA2TE20130210