Identifier
Created
Classification
Origin
04CARACAS2255
2004-07-15 19:19:00
CONFIDENTIAL
Embassy Caracas
Cable title:  

PETROAMERICA: CHAVEZ'S OIL DREAM FOR THE AMERICAS

Tags:  ENRG EPET PREL VE 
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C O N F I D E N T I A L CARACAS 002255 

SIPDIS


NSC FOR TSHANNON AND CBARTON
ENERGY FOR DPUMPHREY AND ALOCKWOOD

E.O. 12958: DECL: 07/12/2014
TAGS: ENRG EPET PREL VE
SUBJECT: PETROAMERICA: CHAVEZ'S OIL DREAM FOR THE AMERICAS

REF: CARACAS 1550

Classified By: Economic Counselor Richard Sanders, for reasons 1.4 (b)
and (d)

------
SUMMARY
-------

C O N F I D E N T I A L CARACAS 002255

SIPDIS


NSC FOR TSHANNON AND CBARTON
ENERGY FOR DPUMPHREY AND ALOCKWOOD

E.O. 12958: DECL: 07/12/2014
TAGS: ENRG EPET PREL VE
SUBJECT: PETROAMERICA: CHAVEZ'S OIL DREAM FOR THE AMERICAS

REF: CARACAS 1550

Classified By: Economic Counselor Richard Sanders, for reasons 1.4 (b)
and (d)

--------------
SUMMARY
--------------


1. (C) Energy Vice Minister Luis Vierma told Emboffs July 12
that discussions with Caribbean nations on the formation of a
"PetroCaribe" joint venture are at a preliminary stage.
According to Vierma, the GOV's plans for the Hemisphere
envision a holding company "PetroAmerica" that would have
three subsidiaries, PetroCaribe, PetroSur, and PetroAndino.
These companies would be involved primarily in the downstream
functions of the oil industry, i.e. refining and
commercialization. Although Vierma made no reference to any
political element to "PetroAmerica" or its would-be
components, it is inescapable. We believe Venezuela is
aggressively pushing its plans for the integration of energy
companies throughout the Hemisphere to gain political
strength. End summary.


2. (U) On July 12, Econcouns, accompanied by Petroleum
Attache, met with Vice Minister for Hydrocarbons Luis Vierma
to discuss a wide range of issues. His comments on
Venezuelan production and upcoming projects are presented in
septel.

-------------- -
PETROAMERICA: AN OIL COMPANY FOR THE AMERICAS
-------------- -


3. (C) On July 12, Reuters reported that on July 10 the GOV
had signed "a preliminary energy cooperation accord with 11
Caribbean nations which aims to refine Venezuelan crude into
cheaper products for the region." According to the report,
the signatories to the agreement were Guyana, Antigua and
Barbuda, the Bahamas, Dominican, Jamaica, Trinidad and
Tobago, St. Vincent and the Grenadines, St. Kitts and Nevis,
Suriname, Grenada, Cuba and Venezuela. Emboffs raised this
story with Vice Minister for Hydrocarbons Luis Vierma, who
explained that the GOV's discussions with the Caribbean
nations are at a preliminary stage. Vierma described the
July 10 meeting as one in which the Caribbean representatives
described the serious impact of high oil prices on their
economies. He characterized the July 10 document as a "joint
communique" rather than an "accord," showing their intent to

continue studying the concept. If the talks are successful,
Vierma said, the resulting joint venture, PetroCaribe, would
be one of three subsidiaries of a holding company called
PetroAmerica. The other two would be PetroSur and
PetroAndino. These companies would be involved in the
downstream functions of the oil industry, i.e. refining and
commercialization.

--------------
PETROCARIBE
--------------


4. (C) Turning first to PetroCaribe, Vierma, an engineer,
drew a chart demonstrating the flow of products through the
refinery process, to transportation, storage and
commercialization. In its initial phase, PetroCaribe would
be a joint venture company that would harness the synergies
in the refinery sector among Venezuela, Trinidad & Tobago,
and Jamaica. Venezuela would ship oil to Trinidad & Tobago's
160,000 b/d refinery and Jamaica's 35,000 b/d refinery. The
joint venture would then handle the marketing of the refined
products to the smaller islands in the Caribbean by a fleet
of boats. Each island would invest in storage tanks and
service stations which would give it an equity stake in
PetroCaribe. Pointing to the Bahamasas an example, Vierma
said its gasoline is now $4/gallon. PetroCaribe, he said,
might eventually be able to subsidize that cost, depending on
PetroCaribe revenues and the equity share of the Bahamas in


the joint venture.


5. (C) When Emboffs asked if the intent is for PetroCaribe to
take over the market share of private sector companies,
Vierma responded that companies now in the Caribbean market,
such as Shell, would be invited to participate. For one
thing, he noted, the would-be partners do not have the
tankers needed to transport the refined products through the
island chains. Vierma added that the entire Caribbean,
including Cuba and "even Puerto Rico," could participate.
Energy Minister Ramirez subsequently announced to the
Venezuelan press on July 14 that regional energy ministers
will meet August 26-27 in Jamaica to work on creating
PetroCaribe. Ramirez is quoted in the press as having said
that the venture seeks to cut out middlemen in the Caribbean.

--------------
PETROSUR
--------------


6. (C) "PetroSur," said Vierma, would encompass the deal,
signed April 6, under which Venezuela sells fuel oil and
diesel fuel to Argentina in exchange for Argentine food and
manufacturered products (see reftel). Vierma added that the
GOA has also approached PDVSA to propose that PDVSA join it
in evaluating certain Argentine exploration blocks.

--------------
PETROANDINO
--------------


7. (C) With respect to the eventual formation of a
"PetroAndino," Vierma noted that Venezuela had signed a
technical agreement with Boliva on May 13 and had also inked
an agreement on LPG with Ecuador. He characterized Peru as
"cold" to the prospects of a joint venture, while Venezuela
and Colombia are still discussing the possibilities of a
cross-border gas pipeline (this will reportedly be an issue
in the July 14 meeting between Presidents Chavez and Uribe).
This pipeline would be designed initially to carry Colombian
gas to western Venezuela. The flow would be reversed as
Colombian stocks decline and what are expected to be robust
Venezuelan stocks are brought on line.

--------------
COMMENT
--------------


8. (C) Although Vierma made no reference to any political
element to "PetroAmerica" or its would-be components, it is
inescapable. In fact, Minister of Energy and Mines Rafael
Ramirez was quoted in the July 12 Reuters report as saying
with respect to PetroCaribe, "it is important to understand
that this type of accord is not a commercial accord....but
fundamentally ...is a political agreement." Petro-diplomacy
has a long tradition in Venezuela, although it has usually
been used with the Caribbean and Central American countries
which are signatories of the San Jose and Caracas Energy
Accords. Venezuela's efforts to push its plans for the
integration of energy companies throughout the Hemisphere,
however, is in line with President Chavez's desire to gain
political strength and to play a larger role in the
Hemisphere. The development of broader export markets for
Venezuela's oil would also be a logical step toward President
Chavez's goal of shifting Venezuela's oil away from its
current market -- the U.S.
McFarland


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2004CARACA02255 - CONFIDENTIAL