Cuba: To pay Scherritt
Cuba to pay $162m debt to Sherritt
Cuba will pay off the $162 million it owes Sherritt International over the next five years, the Canadian energy company said, and the company projected its Cuban oil production will fall by a quarter because the communist government bought out a production sharing agreement.
Three hurricanes and the falling price of nickel, Cuba's chief export, left the government short on cash, causing it to run up pending payments to the Toronto-based company totaling $392.8 million by the end of September.
Sherritt said Cuba still owed it $126 million for domestic oil and natural gas production and $36 million for electric power by the end of last year, and agreed to cover those debts over the next five years with certificates of deposit offering five percentage points over the London interbank offered rate, said an Associated Press report.
Those will be issued by Banco Internacional de Comerico, a government financial institution.
The company also said Cuba's national bank has guaranteed it will not fall behind on payments this year and has already made good on the $18.5 million it owed Sherritt for oil, gas and power production in January.
The government buys oil Sherritt extracts from Cuban fields under production-sharing agreements. In years past, Cuba counted the market value of that oil toward compensation for Sherritt's share of nickel production on the island, but the falling price of the metal saw its debt to the company soar.
Cuba also ran up a bit more than $100 million in debts to Montreal-based Pebercan Inc. by early November, according to that company's third quarter report.
Rather than pay off the Pebercan debt, however, in January the island's oil monopoly, Cubapetroleo or Cupet, bought Pebercan out of a 25-year oil production sharing agreement 10 years early -- paying $160 million and assuming control of crude fields in an area known as Block 7, between Havana and Matanzas province on the island's northern coast.
Sherritt, which also had been a partner in Block 7, received $60.2 million in the buyout.
The loss of those fields means the company's Cuban oil production will fall 25% to about 23,500 barrels per day for this year, its fourth-quarter report said.
Last year, Sherritt produced about 31,200 bpd as part of seven production-sharing contracts. Most came from oilfields at Yumuri, Varadero, Canasi and Puerto Escondido along the north coast.
Cuba's largest oilfield, Varadero is running out of oil, causing overall domestic crude output to sag in recent years.
The repayment plan will allow Sherritt to proceed with a pilot project to inject carbon dioxide into the Varadero field, increasing production by making it easier to extract crude trapped deep below the surface.
The company said it will spend $14 million on the project, which could be fully operational by the first quarter of next year.