DOMINICAN - VENEZUELAN AGREEMENTS ON CONCESSIONAL

UNCLAS SANTO DOMINGO 006119

SIPDIS

DEPT FOR WHA/CAR, WHA/EPSC, EB/ESC; DEPT PASS DOE; TREASURY
FOR DO:LCARTER

E.O. 12958: N/A
TAGS: EPET EFIN ENRG DR
SUBJECT: DOMINICAN - VENEZUELAN AGREEMENTS ON CONCESSIONAL
PETROLEUM FINANCING AND DEVELOPMENT COOPERATION



1. During a November 6 stopover in Santo Domingo lasting
less than twelve hours, Venezuelan President Hugo Chavez
signed with Dominican President Leonel Fernandez two
agreements, the first providing favorable terms for Dominican
purchase of Venezuelan petroleum products and the second
encouraging greater cooperation in petroleum distribution and
social affairs. The politics and atmospherics of the visit
will be reported septel.


2. The first agreement, referred to as the Caracas Energy
Cooperation Agreement, provides concessional financing for
the Dominican Republic to import 50,000 barrels of Venezuelan
crude per day, with financing of between 5 and 25 percent of
this amount for 15 years with one year's grace period at an
annual interest rate of 2 percent . The agreement
specifies that the percentage of the 50,000 barrels to be
financed be pegged to the world price for petroleum. As
long as oil remains at $25/barrel or above, the deal will
provide financing of 25 percent of the amount contemplated in
the agreement. At full financing under the agreement, it is
estimated to be worth $150 million to $200 million annually.
At the lower end of the scale, a world oil price of $15
dollars per barrel would allow the Dominicans to finance 5
percent of the specified 50,000 barrels under the terms
outlined in the agreement. The agreement will be subject to
evaluation and adjustment according to Dominican purchases,
the availability of Venezuelan product, and decisions by OPEC
or any circumstance that obligates Venezuela to change the
quota assigned under the agreement. A similar agreement
exists between Venezuela and Cuba and another is reportedly
in the works with Paraguay.


3. The second agreement is referred to as the Integral
Energy Cooperation Agreement. It encourages the study,
preparation and execution of joint projects for the
exploration, extraction, production, transport, refining,
storage, processing, distribution and commercialization of
hydrocarbons. It promotes training and development of human
resources and the creation of mechanisms to exchange
information, policies, legislation and technology related to
the petroleum sector.


4. During a press conference following the signing of the
agreements, Presidents Chavez and Fernandez announced the
creation of a "mixed commission" to advance sectors related
to societal development in both countries. It is to meet
every six months. The commission will include the Dominican
Secretary of Industry and Commerce with the Secretary of

SIPDIS
Foreign Affairs, and the Venezuelan Ministry of Energy and
Mining and the Foreign Minister. Press reports say that the
mixed commission's goal will be to invent or seek out
creative ways to "advance development" in Venezuela and in
the Dominican Republic.
HERTELL