Caracas gives Cuba industrial lift

Campaign News | Thursday, 20 December 2007

By Marc Frank in Havana

Cuba is to open an abandoned oil refinery this week and a project to expand a nickel plant will go live by the end of the year, as the island resumes industrial development after the years of crisis that followed the Soviet Union’s demise.

Venezuelan President Hugo Chávez will be in the southern port city of Cienfuegos on Friday to inaugurate the originally Soviet-era refinery, a 50/50 venture between the two states’ oil companies that will process 65,000 barrels a day of Venezuelan crude for the Cuban market and 14 other Caribbean countries, such as Jamaica and the Dominican Republic. Like Cuba, these are increasingly dependent on preferentially financed petroleum products from Caracas.

Capacity is scheduled to reach 109,000 bpd by 2012 at a cost of $1.3bn and the refinery will feed the development of related petrochemical industries as plans to turn Cienfuegos into an industrial centre are dusted off after more than 15 years.

A Soviet-built supertanker port on the northern coast and a cross-country pipeline joining it to the refinery are also under joint Venezuelan-Cuban management and the two countries have formed a tanker company to carry fuels in the Caribbean.

In eastern Holguin province, where Cuba’s vast nickel and cobalt reserves are located, the first phase of a $500m (€348m, £252m) expansion of the Moa nickel plant, a joint venture with Canada’s Sherritt International, will add 4,000 tonnes to output in 2008 and up to 14,000 tonnes when completed. Cuba’s three existing nickel processing plants have operated at their 70,000-75,000 tonne capacity for many years.

A fourth plant in the area, which was left unfinished with the end of European communism, will be completed by 2010 in yet another Cuban-Venezuelan joint venture.

Venezuelan and Cuban officials said the refinery start-up symbolised a new phase in their integration efforts - from the exchange of oil for services and expertise to joint development projects in energy, metals, communications and other sectors. Marta Lomas, Cuban foreign investment and co-operation minister, said recently: “I would say that the refinery is a symbol of what we are doing,”

Some 80 per cent of Cuba’s state-owned industry was shut down in the 1990s when its former benefactor collapsed. A second wave of de-industrialisation followed in 2003 with the scrapping of 76 sugar mills, in turn hitting agricultural machinery, rubber and other sectors.

Relations with Venezuela have progressed thanks to recent economic developments in Cuba in the face of tougher US sanctions.

The two countries have worked closely together since Mr Chávez won his first election in 1998. Venezuela received an instant free healthcare system from Cuba, as well as education and other technical assistance. Cuba received preferentially financed oil in return .

President Fidel Castro valued the relationship with Venezuela at $7bn a year in a recent essay. Mr Castro has not been seen in public since undergoing the first of a series of abdominal operations in July 2006, but has recently been a vociferous writer in official media.

Copyright The Financial Times Limited 2007

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