The Cuban Energy Sector

Outlook and Opportunities

“Todo nuestro pueblo, todos los trabajadores, todos nuestros jóvenes, nuestros
estudiantes. Incluso, nuestros pioneros tienen que tomar conciencia de la energía, de sus
perspectives futuras. …mientras no seamos un pueblo realmente ahorrativo, que
sepamos emplear con sabiduría y con responsabilidad cada recurso, no nos podremos
llamar un pueblo enteramente revolucionario.”
Fidel Castro

Our entire country, all of our workers, all of our young people, our students. Even our
pioneers have to be conscious of energy and its perspective futures … while we are not a
saving country, which knows how to employ with wisdom and responsibility every
resource, we will not be able to call ourselves an entirely revolutionary nation.

Fidel Castro

Stephen C. Welty

For: Professor Edmilson Moutinho dos Santos

Non-Renewable Energy Course

University of Calgary/OLADE
MSc. In Energy and Environment
 Table of Contents

I. Economic, Social and Political Situation

A. History

B. Population and Society

C. Political and Economic Framework

1. The Political Outlook

2. Economic Outlook

II. The Energy Outlook

III. Conclusions

IV. Bibliography
HISTORY

The first humans to reach Cuba probably arrived from South America around 3500 B.C.
The groups to inhabit the island at the time Christopher Columbus arrived were the
Guanahatabey, the Siboney and the Taino Indians. These groups of people were hunters
and gatherers in their earlier periods and then became sedentary peoples. The crops they
grew and subsisted from were boniatos, yucca, yams, corn, pumpkins, peanuts, peppers,
avocados and tobacco.

After discovering San Salvador (Watling Island) in the Bahamas, Chrisopher Columbus
sighted a large land mass that he named “Juana” that is now known as Cuba. Since the
island offered little gold, the Spaniards turned their attention to Central America and
South America. The Spanish began colonizing the island around 1512 and created seven
major settlements and overtime established an encomienda system that forced natives to
labor for the Spaniards in plantations and mining. Many of the Indians that were not
slaughtered during conquest or killed for rebellion were worked to death under the
encomienda system. Another factor for the diminishing of the native populations were
new diseases brought to the island that the native bodies were not prepared to deal with.

Due to the decreasing number of available slave labor, the Spanish began to import slave
labor from Africa. These populations were kept together in tribal groups, which allowed
them to keep some of their African heritage and traditions. During the colonial period the
Spanish Crown profited from its ownership of Cuba through cattle ranching, the tobacco
industry, and sugar cane production. But Cuba also played an important role for the
Spanish empire as a transit point for all of the wealth that was scavenged from South
America and Central America. Because of the large amount of wealth passing through its
ports, Cuba became a target for pirate attacks and the ports had to be properly garrisoned
to deal with this new threat. Between 1750 and 1800 Cuba was fought over by the
imperialist European countries and was under British control for a short period of time.
Finally it was returned to Spain under the 1763 Peace of Paris.

Between 1810 and 1825 Mexico and all of mainland South America won independence
from Spain. Cuba and Puerto Rico were the only remaining Spanish colonies in the
hemisphere, despite Simón Bolívars’ desire to free Cuba as well. Simon Bolivar was
warned to desist by the U.S. government after its declaration that it wished Cuba to
remain under Spanish control. During this period, Cuba became the worlds largest sugar
producer, supplying the U.S, Britain, Spain and many other countries. When the British
began to enforce their ban on slave trade in 1862, Cuban businessmen began to import
Mexican Indians and Chinese laborers to work in sugar cane fields.

From 1868 to 1898, the Spanish ruled Cuba but there were two Cuban rebellions led by
some of Cuba’s historical figures, namely, Jose Martí, Máximo Gómez, Carlos Manuel
de Céspedes among others. In 1897 the U.S. intervened in the civil war leading to the
Spanish-American war. The peace treaty was signed on December 12, 1898 in Paris
between the U.S. and Spain (the Cubans were not invited). In the treaty the U.S. agreed
to respect Cuban self-determination but reserved the right to intervene when it deemed
necessary. For several years, Cuba remained under U.S. occupation and US governors
were appointed. Cuba didn’t become an independent republic until May 20, 1902.

The first governments of Cuba were ineffectual, corrupt and discriminatory against
blacks. By 1958 half of Cuba’s land, industry and services were in the hands of foreign
companies and organizations. Fulgencio Batista was the last president (dictator by
military coup in 1952) before the current government of Fidel Castro. Batista and his
cronies had enriched themselves through brides and shady deals with foreign companies.

After a failed revolution in 1953 and some years of imprisonment as a political dissident,
Fidel Castro regrouped in Mexico with several revolutionaries and returned to the island
in 1956. After three years of guerilla fighting from the Sierra Maestra mountains, Fidel
Castro and his revolutionaries won power in 1959. Batista fled to the Dominican
republic with US$40 million in government funds.

The first president of revolutionary Cuba was Manuel Urrutia who resigned in less than
one year due to his disagreement with the Agrarian land reform taken out by the then
prime minister, Fidel Castro. All estates over 400 hectares were nationalized which
directly affected mostly American companies holdings. Further interactions between the
US government and the new Cuban government led to the nationalization of all American
companies including refineries and electricity companies. During these years of
reformation the educational system was brought to a new level increasing the literacy
from 50% of the population to 90% within a few years. The medical system was also
greatly improved.

Due to the loss of assets in Cuba, the US severed political ties with the new Cuban
government and created an economic embargo forcing Cuba to look for other trading
partners. This led to cooperation between the Soviet Union and Cuba, which eventually
led to the Cuban Missile Crisis of 1962.

Cuba became increasingly dependent on the soviet bloc countries and in the 70’s became
part of Comecon (the Soviet led Council for Mutual Economic Assistance). Cuba had
copied many Soviet institutions and the inefficiencies were becoming apparent. By 1988
87% of Cuba’s trade was with the Soviet bloc. This dependence on the Soviet bloc cost
Cuba dearly in the early 90’s when the Soviet bloc collapsed. Cuba underwent a process
known as “rectification of errors” whereby the government institutions were restructured
for more efficient operation. President Fidel Castro (became president in 1976) declared
a special period for five years as institutions were reformed and the economy tried to
recover from the sudden loss of trading partners and increased economic sanctions from
the U.S.

During this period there were several measures taken to reduce energy consumption and
increase efficiency. Some measures taken were the provision of bicycles to the populace
for transportation and educational programs in efficiency. One such program was the
“Programa de Desarollo de las Fuentes Nacionales de Energía” which was approved in
May of 1993 and still currently functioning. Today, the Cuban economy has opened up to
private businesses and foreign investment but continues to be compromised by sanctions
from nations with differences in political ideology.

POPULATION AND SOCIETY

Cuba’s population is a rich mixture of white, black, and Asian (Chinese) races. Most of
the native Indians were wiped out by conquest, disease and the encomienda system. The
population is about 11 million with the population well distributed throughout the island.
One of the goals of the revolution was to prevent the migration to cities similar to what
has happened in other developing nations by increasing the quality of life in rural areas.
The largest cities are Havana (2.2 million), Santiago de Cuba (440,000), Camaguey
(300,000), and Holguín (240,000).

Since 1959 the Cuban government has had a housing policy preferential to individual
ownership. Rental properties were nationalized and rental payments were reduced 50%
and since 1962 rent payments could not exceed 10% of a families income. Rent
payments were converted to 5 to 20 year mortgage payments and most people own their
own property. The new government also set up a system of volunteer microbrigades to
build new housing developments after demolishing shanty towns on the outskirts of the
cities. This measure not only improved the living conditions of a large fraction of the
population but it also helped preserve historical pre-revolutionary buildings in the city
centers. Today, building is limited by the scarcity of materials.

Education and health systems were reformed following the revolution leading to the most
developed and functional systems in Latin America. All citizens are guaranteed free
education until the 12th grade and university education is free for selected students. The
literacy rate is up to 94.5% and the number of rural schools has increased significantly
since the revolution. Women have equal access to education and comprise 42% of the
work force today compared to 15% before the revolution also due to “círculos infantiles”
(free day-care centers).

The infant mortality rate is among the lowest in the world at 7.1 per 1000 live births. The
health care system is free for all Cubans and 39% of the governments’ budget in 1999
was dedicated to public health and education.

Another good indicator of a countries social situation is the population pyramid, which
shows pictorially the percentage of the population in different age brackets. Typically,
less developed nations have a rapidly increasing population indicated by the largest
segments of the population in the lower age groups. The picture below shows that Cuba
is not in this condition and that its population profile appears to be more like that of a
developed nation that has achieved zero population growth and also achieved a good
health care system that increases the life expectancy of the population. It should be noted
that some of this phenomenon is due to emigration of citizens to wealthier nations.
 Figure 1: Population pyramid for Cuba in the year 2000 taken from the US Census Bureau

POLITICAL AND ECONOMIC FRAMEWORK

Political Outlook

The Republic of Cuba’s current president is Fidel Castro and the type of government is a
communist state. Fidel Castro became prime minister in 1959. In 1976, when that post
was abolished, he became president. He is the world’s longest standing leader. The
executive branch of the country is composed of Council of State and the Council of
Ministers. One of Castro’s roles is as head of both of these institutions. The Council of
State’s 31 members are elected by the National Assembly of People’s Power. The
Council of States president is the head of government and state. The Council of
Ministers 41 members are nominated by the president and approved by the National
Assembly of People’s Power.

The 601 members of the National Assembly of People’s Power are elected every five
years. The National Assembly is the legislative branch of the Cuban government. The
amendment to the constitution in 1972 allowed for direct elections of the members of the
National Assembly by universal suffrage and secret ballot. Half of the candidates are
nominated by mass organizations while the rest are chosen by elected municipal
delegates. Only one candidate contests each seat and a 50% majority is required to
replace the delegate. The country is divided into 14 provinces and each province as a
provincial assembly whose candidates are elected in much the same way as the National
Assembly. In contrast, the municipal assemblies are elected with several candidates for
each seat. The Judicial Branch of the government is composed of The People’s supreme
court whose official are elected by the National Assembly.

The only political party in Cuba is the Communist party. It was formed in 1965 by
combining previously existing parties and the guerillas who participated in the revolution
in 1959. There are harsh prison penalties for individuals or organizations attempting to
undermine the government and the party. The party controls several mass organizations
such as the CDR (Defense of the Revolution Committees) and the CTC (Confederation of
Cuban Workers). Contrary to many claims, a large majority of Cubans are either
involved in the government or are supportive of it and the government has good reason
not to allow opposition parties or free elections because such opposition would certainly
get a great deal of U.S. support and Cuban expatriate support. Such an environment
would destabilize the country and allow a great deal of foreign input into the countries
decision-making activities and policies.

The advantage of such a governmental structure in terms of the energy sector is that wide
sweeping and far ranging planning decision can be made and implemented. Cuba is at
the forefront of sustainable development among developed and developing nations. The
importance of the power to be able to make long term planning decisions and programs
cannot be underestimated in terms of sustainable development. Cuba’s success in
implementing a functional social welfare and educational system speaks for itself and
brings into question the wisdom of espousing only one type of political and economic
system for all situations as the U.S. government has done.

During the 1990’s, the Cuban government has opened its doors to foreign companies in
large-scale projects such as oil exploitation and telecommunication systems. A large
number of European and Canadian companies have begun to do business with Cuba
despite the Helms-Burton Act, which threatens US action to penalize such companies for
doing so. American executives have begun to hold talks with Cuban officials for
potential future business agreements despite the State Departments discouragement of
such talks. All American companies are prohibited from doing business with Cuba.

Economic Outlook

The Cuban economy is very different from most of the economies of the rest of the
world, which makes it especially difficult to analyze the economy using conventional
techniques. These difficulties were analyzed by Nicolás Sánchez and Miles Cahill in
their paper entitled “The Strengths and Weakness of Factor Analysis in Predicting Cuban
GDP.” A number of economists from the United States have been sent to Cuba to report
on the economy and are many times surprised by the lack of resources but the fact that all
basic needs are met and there is still money for rum and dancing. In the CIA World Fact
Book, the per capita GDP of Cuba for the year 2000 was estimated to be $1,700.

The average wage of a Cuban is 190 pesos, which with today’s exchange rate of 27
pesos/dollar is only about US$7 per month. However, Cubans pay 6% to 10% of their
salary, regardless of what they earn, for rent and many Cubans own their homes. All of
the basic necessities are heavily subsidized by the government and paid for in pesos. It
must also be taken into account that all medical care and education are free. Every
Cuban receives a ration card that gives them access to an allotment of rice, beans, eggs,
milk and other goods from the “bodegas” (government stores). The prices of these goods
are in pesos and heavily subsidized by the government. Despite the fluctuations of the
peso on the international market, these prices have remained constant for years.
The sources of foreign currency in Cuba are tourism, sugar cane industry, nickel mining,
and tobacco. Before the revolution 70% of the nations trade was with the United States
but after nationalizing many US industries, trade with that nation dropped to 4% by 1961.
The USSR took over as the most important trading partner buying 81% of its exports and
supplying 61% of it imports by 1990. The fall of the soviet bloc caused serious economic
hardship for Cuba forcing them to restructure their economy. Today Cuba has diversified
its trading partners with the most important being: Russia (only 18% of exports today),
Canada, The Netherlands, Spain, France, China and Mexico.

During the 1990’s Cuba’s lack of petroleum led to a policy of importing thousands of
bicycles from China to replace gasoline powered transportation. From 1991 to 1995, the
nation reduced its energy consumption by half. This also led to greater efforts put into the
national petroleum company and by 1998 Cupet was pumping 1.68 million tons of heavy
crude oil. Today the electricity use of Cuba is growing two to three times as fast as GDP.

The Cuban government has allowed a number of joint ventures (350 in 2000 worth about
US$2.6 billion) to provide services and supply goods for its population. Joint Ventures
are common in the energy industry, telecommunications industries, tourism, mining and
agriculture. The only areas not open for joint ventures are national defense, health and
education.

The government has also allowed for individual businesses owned by Cubans. The
government was forced into this position by a combination of its policy of 0%
unemployment and the fact that it had to lay off a number of workers from government
companies to improve efficiency and avoid financial collapse. These new business are
subject to high taxation and many government regulations. To avoid an emerging
capitalist class, it is forbidden for Cubans to higher employees for their businesses.

Figure 2: Taken from “The State of the Cuban Economy”.

The graph in figure 2 shows the change in GDP from 1985 to 1995. It is clear that the
fall of the Soviet block from 1988 to 1993 had a disastrous effect on the Cuban economy
but after 1993 the economy began to recover. Other sources estimate that the increase in
GDP in 1996 was 7.8%, in 1997 it was 2.5% and in 1998 it was 1.2%. At this rate of
recovery it would take the country 10 years to recover to its 1988 level. The budget
deficit has been reduced from 33% of GDP in 1993 to 2.5% in 1998 due to the
governments’ action for rectification.

ENERGY OUTLOOK

Cuba is one of three Caribbean nations with a significant gas and oil production. The
other two nations are Barbados and Trinidad and Tobago. The graph in Figure 3 shows
the natural gas production of the three nations from 1980 to 1999. It is clear that since
1996, Cuba has made an effort to increase its natural gas production.

Figure 3: Taken from EIA

Figure 4: Taken from EIA

The graph in figure 4 shows the oil production of these three nations and again a trend
can be seen in the increase of Cuban oil production since 1993.
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The graph in figure 5 shows the amount of net electricity generation for the region. The
largest electricity producers are Cuba and Puerto Rico with 14.5 TWh and 16.5 TWh
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Figure 6: Caribbean Primary Energy Consumption for 1999; Data taken from EIA
Figure 6 shows the primary energy consumption for the region in 1999. Cuba and
Trinidad & Tobago are the largest consumers of primary energy in the region but Cuba
has a much higher dependence on petroleum whereas Trinidad and Tobago depend
heavily on natural gas. Puerto Rico’s petroleum consumption is about the same as
Cuba’s. However, the values in graphs 5 and 6 must be compared to the population of
each nation to get a more indicative value of energy consumption per capita. The
population of Puerto Rico in 2000 was 3.81 million and the population of Trinidad and
Tobago in 2000 was 1.36 million. The primary energy consumption per capita per year
for Puerto Rico, Trinidad and Tobago and Cuba is 28MWh, 87MWh, and 10MWh
respectively. From the values in figure 5, assuming all electricity generated is consumed
within the country (a reasonable assumption for island nations), the electricity
consumption per capita per year for Puerto Rico, Trinidad and Tobago, and Cuba is 4330
kWh, 3676 kWh and 1318kWh respectively. Another valuable comparison is to compare
GDP per capita with energy consumption to gauge the efficiency of a nation in running
its economy or indicate the kind of economic activity. The year 2000 per capita GDP’s
of Puerto Rico, Trinidad and Tobago and Cuba are US$10,000, US$9,500, and US$1,700
respectively and the resulting Energy/GDP for the three nations are 2.8kWh/$, 9.2kWh/$,
and 5.9kWh/$ respectively. Larger values of Energy/GDP suggest less efficient systems
and resource extraction economies or energy intensive industries whereas the lower
values indicate a more services oriented economy and more efficient processes. An
obvious weakness of this approach is the difficulties in predicting the actual GDP for
nations such as Cuba.

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Figure 7: Crude Oil Refining Capacity for Caribbean Nations for 2000. Taken from EIA data.

Cuba has the third largest crude oil refining capacity of the Caribbean nations as can be
seen from figure 7. The major refineries are in Cienfuegos (76,000 b/d), Ermonos
Dias/Santiago(101,500 b/d), Niko Lopes/Habana (121,800 b/d), and Serhio
Soto/Cabaiguan (2,100 b/d). Most of the crude oil produced in Cuba is heavy oil with
high sulfur content. This kind of oil is best used in thermal electricity plants and a great
deal of the hydrocarbons used in the transportation sector is imported as refined product.
In 1999 51% of the oil used in the electricity generating plants of the Unión Eléctrica
came from national crude as opposed to 1% in 1989. The national crude oil is also good
for the cement industry and in 1999 supplied 97% of the crude oil for that industry as
opposed to 9% in 1989. It is estimated that by 2003, 100% of the electricity consumption
of the nation will be supplied by national sources with the modification of electricity
plants to take national crude and the increasing use of natural gas.

Proven Reserves as of 1/1/01 Production

Oil (crude, liquids,

refinery gain) Natural Gas
Crude Oil Natural Gas (1,000 barrels per day, (billion cubic feet,
(1,000 barrels) (billion cubic feet) 2000) 1999)
Barbados 2,508 5 1 1
Cuba 283,500 636 42.75 17.7
Trinidad & Tobago 686,000 21,351 125.16 414
Total 972,008 21,992 168.9 432.7
Table 1: Proven crude oil reserves and current production for Caribbean nations. Taken from EIA.

Table 1 shows the proven reserves and current production for the three oil-producing
nations of the Caribbean. At current oil production rates, Cuba would have 18 years of
oil production with current proven reserves while Trinidad and Tobago would have 15
years and Barbados would have 6.9 years. Clearly there is a greater potential for
increasing production and exploration in Cuba and Trinidad and Tobago. This doesn’t
include any potential new finds in unexplored areas. In Cuba’s case, if the embargo
were lifted, there would be a potential for US business to expand their operations into the
waters surrounding Cuba and would also remove any risks of action by the US
government to other foreign firms from the Helms-Burton Act. The location of Cuba’s
reserves is ideal for the American market. The gas situation is even more advantageous
since the transportation of natural gas is more expensive than the transportation of oil.
Gas pipelines could be constructed to Florida, supplying a growing market there. A
pipeline of 0.72 bcf/d to Florida would represent a business of US$300 million per year.
In 1995 the Cuban National Assembly ratified the Law for Foreign Investment, which
makes oil exploration and production very attractive for foreign investors. Cuba has
recently opened up 59 blocks for exploration by foreign oil firms. Sheritt International
(Canada), Repsol YPF (Spain), and Petrobras (Brazil) are some of the major firms
currently in the oil business in Cuba.

Figure 8 compares the amount of crude oil imported in 1989 to 1998 as percentage of the
total consumption. In 1989 42% of the crude oil was imported and only about 2% was
nationally produced crude oil. In 1998, however, those figures changed to 15% of crude
oil imported to 17% of crude oil from national production. The biomass generation,
mostly from bagase, remained relatively constant between the two periods at about 28%
percent of national consumption. The largest change between the two periods was the
increase from 21% to 40% importation of refined petroleum products. The main reason
for the increased importation of refined products is the international market and
supplier’s conditions.
 Figure 8: The structure of energy supply for Cuba. Taken from “Consideraciones sobre el Sector
Energético Cubano”

The energy intensity of a nation over a period of time indicates the trends in the countries
use of energy. The graph in Figure 9 shows the general trends of energy use in Cuba.
From 1989 to 1993 there was a decrease in the energy intensity of the island nation based
on the failing economy. Fewer products were produced from the cement industry, sugar
industry and most of the industries leading to a decrease in overall energy consumption.
In the next period from 1994-1997 their was a marked increase in the energy intensity
largely due to the increase of economic activity in the traditional export industries which
are high in energy consumption. There was also an increase in the commercial and
residential sectors. The improvements in energy efficiency in this period did not lead to a
decrease in energy intensity because of the increased economic activity and the growth of
GDP. In the next period from 1998-1999 the 300 million dollars invested in energy
savings programs and energy efficiency (during the period from 1995 to 1999) began to
pay off and the energy intensity of the island nation began to decrease sharply while the
GDP continued to grow.

Figure 9: The dynamic of energy intensity for Cuba (year 1989=1). Taken from “Consideraciones
sobre el Sector Energético Cubano”.
During the year 2000 this trend continued and there was a noticeable decrease in the
overall consumption of energy with an increase in GDP due partially to the
improvements in energy efficiency in all sectors of the economy and the increase in
service related industries such as tourism. Despite the achievements in energy efficiency
over the last decade, the government continues to put a high priority on the rational use of
energy. In April 2001, the Cuban government launched its Cuban Energy Savings
Program that will audit and engineer changes in industry and residential sectors to reduce
electricity consumption. Many aging energy plants are being refurbished with the help of
foreign companies.

Rational use of energy is not limited to energy efficiency. One example of irrational use
of electricity is the use of electricity for cooking and heating. Usually the electricity is
generated from thermal power plants, transported to the end user in the form of
electricity, and then reconverted to thermal energy. The Cuban government focused its
residential programs of rational use of energy on issues such as supplying homes with
natural gas for cooking and heating for direct use of the thermal energy. In many homes
this meant substituting natural gas for kerosene, which helped to decrease harmful
emissions and improve indoor air quality. The economic incentive for substituting
kerosene is the decreased use of kerosene in the international economy. Many times
Cuba had to import jet fuel to use for kerosene because of its lack of availability. Other
actions were to increase the energy efficiency of refrigeration and illumination.

In the industrial sector the government began a program of charging for electricity in US
dollars to account for the actual cost of energy. This led to a change in the behavior of
industries and a real economic incentive to practice energy efficiency. At the end of the
year 2000, 70% of state companies were paying the actual cost of electricity in US
dollars. Other measures include encouraging foreign investment to bring industries up to
the state of the art in technology. This is done through BOOT (Build Own Operate and
Transfer) schemes where the business is owned by the foreign investor for a period of
time agreed to by both parties and then transferred to the Cuban government.

Cuba has also undertaken a program to improve the transmission of electricity. This
includes reducing the line losses and accounting for non-metered usage of electricity. To
support such activities, an anti-fraud program was formed and the appropriate legal
support for the program was instituted.

They have also instituted programs for the research and development of renewable
energy sources. Many rural locations away from the grid have been provided electricity
with wind and solar power. Micro-hydro is also in use in the country. Cubasolar is the
institution in charge of renewable energy development on the island and has been
actively involved in the practical use and installation of systems throughout Cuba. An
initial project of electrifying rural schools and doctor’s offices with wind and active solar
has been remarkably successful. Aside from biomass from the sugar cane industry,
renewable energy continues to contribute only a small percentage of the total energy
consumed.

In 1982, the Russians initiated the construction of a nuclear power plant in Juraguá but
work stopped when the Russians withdrew their subsidies. The plant is 75% finished but
requires another US$750 to complete. The plant was to have four reactors, each with a
capacity of 416 MW. The plant would have generated 1664 MW, which would have
been approximately 50% of the electricity generated in 1998. This plant would have
saved the Cuban government 600,000 tons of oil annually for each of the four reactors.
Cuba and Russia have talked about continuing construction but in 2000 they both agreed
to abandon the project.

CONCLUSION

The Cuban situation is quite unique in that it has very high potential for economic
activity in the energy industry, it has an ideal location close to a very large market, but it
is plagued by an embargo because of its ideology (The Cuban government is willing to
indemnify American business that lost assets during the nationalization process but the
US government is unwilling to talk). It is one of the most developed of the “developing
nations” in terms of social welfare and quality of life. It is among the first nations in the
world to pioneer and apply sustainable development encouraging and funding energy
efficiency and rational use of energy.

Until recently, business in Cuba was not attractive for foreign investors but with
modifications in the Law in 1995, it is increasingly attractive for foreign investors to do
business in Cuba despite threatened action from the US government to foreign businesses
cooperating with the Cuban government. The main areas for investment are in the oil and
gas industries as well as in energy efficiency projects in the industrial sector of the
economy.

Cuba’s success in the moving towards sustainable development clearly demonstrates the
need for strong and decisive government involvement in the process. The government’s
role includes passing legislation, offering tax incentives for sustainable development,
offering free or subsidized education in sustainable development areas, and providing
funding for the development of new technologies and methods.

The future of the Cuban energy sector lies in the rational use of energy, increased
domestic oil and gas production, the increased use of natural gas to replace oil
derivatives, and the increased use of renewable energy. The trends in these areas have
been discussed in this paper and all indications suggest the trend will continue and even
increase in the coming years.

If the embargo on Cuba were to be lifted, it would multiply the economic recovery rate.
If current government policies continue and the funds are made available for its
ambitious plans, Cuba would fall into a category of its own in terms of sustainable
development and social well being. Most of the government’s policies in the energy
sector are also good for the environment and since many of its oil production facilities are
near large tourists resorts, a concerted effort has been made to minimize the
environmental impact of this activity.
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