April 30, 2018 / 3:53 PM / in 3 months

France’s Total, Germany’s Siemens hope to sign Cuban LNG deal soon- sources

HAVANA, April 30 (Reuters) - French energy firm Total SA and German industrial giant Siemens AG hope to sign a deal soon with Cuba to build a 600 megawatt gas-fired power plant on the island, according to diplomats and businessmen with knowledge of the talks.

The two are leading a consortium that has been in negotiations with Communist-run Cuba since last year when they won a tender for the project, said the sources, who did not identify the other members

“Total, with some international partners, is looking at a LNG power project in Cuba, one of several countries where Total is exploring similar LNG potentials,” the company said in a statement to Reuters.

A Siemens spokesman in Germany was not immediately available for comment.

The sources cautioned that many details of the project were under negotiation and that the combination of U.S. sanctions and Cuban bureaucracy meant there was no guarantee the agreement would be finalized, though they were hopeful.

The potential deal is the latest example of companies from the European Union moving to take advantage of Cuba opening to foreign investment.

“The EU has become Cuba’s first trade partner and was already the first in investment and development cooperation,” the European Union’s top diplomat Federica Mogherini said in January while visiting the country.

Siemens signed a letter of intent with the Cuban power authority in 2016 to help modernize the grid.

“With this important agreement ... we will assist and support Cuba on the development of a sustainable and modern electricity system,” Willi Meixner, head of Siemens Power and Gas division, said at the time.

In the Matanzas Bay project, 124 kilometers (77 miles) east of Havana, Total would obtain the liquid gas from abroad, and then store, process and supply it to the plant, which would be built by Siemens, the sources said.

The project would mean less dependence on oil and less pollution, Jorge Pinon, a Cuban energy expert at the University of Texas in Austin, said.

“It could be the best decision that the Cuban government has made toward an energy policy able to react to changes in price, geopolitical events and or supply-demand disruptions,” he said.

Cuba was left in the lurch when its sole oil supplier, the Soviet Union, collapsed in 1991. More recently it has been scrambling to find alternative oil supplies as ally Venezuela’s economy and oil production implode.

Cuba’s total generating capacity is around 6,000 megawatts and demand is increasing due to growing tourism, digitalization and a new private sector.

Around 95 percent of electricity in Cuba is generated by fossil fuels. The government has begun a program to generate 24 percent with renewable sources by 2030.

Total and Siemens have engaged in commerce with the Caribbean island nation for decades.

Total was the first foreign company to drill for oil just off shore in the 1990s after the Soviet Union collapsed. The company failed to find a commercially viable field.

It also has a joint venture with Cuban state oil monopoly Cubapetroleo (CUPET), Elf Gas Cuba, which for 20 years has packed a liquid propane and butane gas mix into cylinders and distributes them for use by households and businesses in eastern Cuba.

The Cuban state power authority, Union Electrica, and CUPET did not respond to a request for comment. (Reporting by Marc Frank Editing by Daniel Flynn and Susan Thomas)

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