With Cuba's infrastructure in need of rehabilitation, how could lifting trade restrictions on Cuba by the United States affect U.S. energy companies? On today's The Cutting Edge, EnergyWire reporter David Ferris explains how a change in policy could affect the oil and gas sector, renewable energy companies, and electric infrastructure developers.
Monica Trauzzi: Welcome to the Cutting Edge. How could lifting trade restrictions on Cuba by the U.S. affect energy companies? EnergyWire's David Ferris is here with a look at how the U.S. stands to benefit from a change in policy. David, what are Cuba's biggest energy challenges right now?
David Ferris: Well, thanks for having me, Monica. The -- my colleague, Nate Gronewold, and I wanted to look at what's going on in Cuba right now because it's possibly on the verge of a transition unlike anything we've seen in the last 50 years. And we wanted to look at what the opportunities are for energy companies in the U.S. with the potential opening in Cuba. And the biggest single challenge that Cuba faces is fuel. It's -- like any island, it has difficulty getting fuel because it doesn't have enough of its own, but in Cuba's case, that's exceptionally difficult because of our economic embargo. Makes it impossible to participate in global fuel markets. And so it's had to turn to one patron right now, Venezuela, and that gives it -- while it has been a consistent supply for years, Venezuela's having its own problems with the price of oil disrupting its economy. And that fuel supply is endangered, and by becoming more of a full participant in the global economy, it could possibly resolve that fuel problem.
Monica Trauzzi: So then what are the opportunities that exist for the U.S. oil and gas industry?
David Ferris: Well, I think the thing that people most need to know is that the energy infrastructure in Cuba is old, really old. I mean, it's from the 1940s and 1950s, equipment from the U.S. Same vintage as the old Buicks and Chevys that are still driving the streets of Havana. Other equipment from the Soviets in the 1960s, and it's all right for replacement, and all of that equipment is stuff that needs to be replaced if the Cuban people are to experience a higher standard of living.
Monica Trauzzi: And their grid also needs modernization?
David Ferris: Oh yeah. Their transmission grid is in decent shape, but their power plants and their distribution grid are quite creaky.
Monica Trauzzi: And that's somewhere where the U.S. could step in and help as well.
David Ferris: Oh, definitely. Our -- we sell some of the best equipment in the world, and suppliers from around the world have been staying out of Cuba because of our embargo. We'd have a new market just 90 miles away from our shore.
Monica Trauzzi: How about renewables?
David Ferris: There's a big opportunity for renewables in Cuba as well. I mean, as any tourist knows, the Caribbean is full of wind and sun, and Cuba is no different. And in addition, Cuba has -- it used to be the world's largest exporter of sugar. Right now, its sugar industry is pretty much dormant, but it could produce prodigious amounts of sugar to be used either for biofuels or for bio-based generation.
Monica Trauzzi: So if the policy does change, there's still many hurdles on the road ahead, and one of those hurdles is financing. How does Cuba pay for all of these changes and infrastructure improvements?
David Ferris: Well, that is really the big question because Cuba just doesn't have a lot of money lying around, and international lending agencies are probably going to need to step in to lend billions and billions of dollars to revitalize the energy sector. And it's likely that on the terms of those loans, they're going to require some fundamental changes to how the energy sector runs in Cuba. Right now the Cuban energy sector is one of the most inefficient in the world, is highly overstaffed, and needs and lacks transparency, the kind of transparency you usually see in other energy systems. And so the big question is how much control is the Cuban government willing to let go in order to bring in the money it needs?
Monica Trauzzi: And you report the country has more engineers and Ph.D.s than any other Latin American country. Where could all that talent go?
David Ferris: Well, a big destination for it could be us, and I think one thing that gets overlooked is how much intellectual firepower there is in Cuba. It has a really good educational system, it has a very high literacy rate. It has a lot of engineers. And, for example, Florida Power and Light, just across Florida Strait from Cuba, its former CEO, a lot of its current and former vice presidents, some of its head engineers were all born in Cuba. And it would be a big benefit of an opening with Cuba is the brainpower that it could bring to our shores.
Monica Trauzzi: All right. And readers can find this story in today's EnergyWire.
David Ferris: Yes, they can.
Monica Trauzzi: Thank you for ... David.
David Ferris: Thank you.
Monica Trauzzi: More Cutting Edge coming next Friday. We'll see you then.
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