BAHAMAS SKEPTICAL OF PETROCARIBE IMPLEMENTING

C O N F I D E N T I A L SECTION 01 OF 02 NASSAU 001610

SIPDIS

STATE FOR WHA/CAR WBENT

E.O. 12958: DECL: 09/09/2010
TAGS: ENRG PREL BF
SUBJECT: BAHAMAS SKEPTICAL OF PETROCARIBE IMPLEMENTING
AGREEMENT

REF: NASSAU 1225

Classified By: Charge d'Affaires Brent Hardt, Reasons 1.5 b and d


1. (C) SUMMARY: The Bahamas sent a ministerial delegation to
the September 6 Petrocaribe discussions in Jamaica but did
not sign an implementing agreement. The Cabinet remains
sharply divided on Petrocaribe but expects to discuss the
issue at its next meeting on September 13. The chief
government proponent of Petrocaribe claims that the Bahamas
Electricity Corporation would be an early beneficiary of the
program, but the electric company's current exclusive supply
contract with Shell has a notification period of several
months and withdrawal penalties that make any short-term
switch unlikely. END SUMMARY.


2. (C) The Bahamas was represented at the September 6
Petrocaribe discussions in Montego Bay by Foreign Minister
Fred Mitchell, Minister of Trade and Industry Leslie Miller,
and Minister of Works and Utilities Bradley Roberts.
Minister Miller is the government's chief proponent of
Petrocaribe and signed the initial agreement on behalf of The
Bahamas at the end of June.


3. (C) Prior to his departure for Jamaica, the Foreign
Minister privately indicated that The Bahamas did not intend
to sign anything at the meeting. Mitchell also made a public
statement: "The Bahamas is at present studying the full
parameters of the initiative and will in due course determine
what steps it will take in this matter. The Petrocaribe
initiative is clearly part of the process of the sovereign
nations of the region seeking to chart their own course."


4. (C) The Bahamian delegation did not change its position
in Montego Bay and did not conclude an implementing
agreement. The Foreign Minister on September 9 indicated
that Petrocaribe would be discussed at the next Cabinet
meeting on September 13. He commented that Cabinet remained
divided on the issue.


Electric Company to Benefit?
--------------


5. (C) Minister Miller has claimed that the Bahamas
Electricity Corporation (BEC) would be one of the early
beneficiaries of Petrocaribe and could save between $10
million and $15 million per year. He stated that BEC as a
government-owned entity could participate immediately on a
government-to-government basis once an implementing agreement
is signed.


6. (C) BEC currently purchases its petroleum products from
Shell Bahamas Limited. Shell is two years into a five-year
contract as BEC's exclusive supplier. Shell's Country
Chairman for The Bahamas privately indicated that the supply
contract does have an escape clause, but that it also
contains a mandatory notification period of several months
(he believed six months) before the agreement could be
broken. Even with notification, BEC would still have to pay
a considerable penalty to withdraw. Shell's Country Chairman
also stated that BEC's General Manager and Chairman told him
that they have not been given any information from the
Ministry of Works and Utilities about a possible switch in
supplier. Shell's understanding, however, is that a change,
if any, in BEC's supply arrangement would only affect the
main island of New Providence, where BEC has storage
facilities, and not the other islands in The Bahamas.


7. (C) COMMENT: After months of claiming Petrocaribe would
drastically reduce pump prices for consumers, Minister Miller
has lately focused his claims on BEC. The Montego Bay
meeting was the first Petrocaribe event that Minister
Roberts, whose ministry has oversight over BEC, has attended.
That said, the mechanics of a supply switch are more
complicated than Minister Miller is letting on or has
prepared for, suggesting he is unaware or unconcerned about
the details of implementing the agreement he is calling for.
Minister Mitchell has promised Charge a more detailed readout
of the Government's position following the Cabinet discussion
next week. It is clear from his comments, however, that
divisions remain sharp among his Cabinet colleagues.
HARDT