PETROCARIBE UPDATE #23: DOMINICA, GRENADA AND ST.

C O N F I D E N T I A L BRIDGETOWN 001127 SIPDIS SIPDIS SOUTHCOM ALSO FOR POLAD E.O. 12958: DECL: 06/30/2016 TAGS: ENRG EPET PGOV PREL DO GJ SC VE XL SUBJECT: PETROCARIBE UPDATE #23: DOMINICA, GRENADA AND ST. KITTS SIGN NEW DEALS WITH VENEZUELA REF: A. BRIDGETOWN 877 ¶B. BRIDGETOWN 602 ¶C. 05 BRIDGETOWN 2459 ¶D. 05 BRIDGETOWN 2452 ¶E. 05 BRIDGETOWN 2085 Classified By: DCM Mary Ellen T. Gilroy for reasons 1.4 (b) and (d). ¶1. (C) Summary: Dominica, Grenada, and St. Kitts have each signed bilateral agreements with Venezuela allowing joint venture companies to begin receiving petroleum products under the PetroCaribe oil accord. Dominica and Grenada will reportedly import several different types of fuel, including diesel that would be used for generating electricity. Neither country has, however, begun negotiations with their privately owned electric companies about utilizing the Venezuelan diesel. These three countries' initiatives come amidst indications that joint venture PetroCaribe-related companies could soon be established in other Eastern Caribbean nations. Combined with the reported failure of Organization of Eastern Caribbean States (OECS) members to agree to negotiate as a bloc for oil from Venezuela, these developments suggest that countries in the region will continue dealing bilaterally with Venezuela, thereby missing a potential opportunity to maximize the economic benefits of PetroCaribe. End summary. -------------- Dominica, Grenada, and St. Kitts Make Deals -------------- ¶2. (U) The governments of Dominica, Grenada, and St. Kitts signed bilateral agreements with Venezuela that should allow these countries to begin receiving petroleum products under the concessionary financing scheme offered by PetroCaribe. In Dominica, Minister of Energy Reginald Austrie and Alejandro Granado, Vice President of the Venezuelan National Petroleum Company (PDVSA),signed an agreement on June 26 establishing a new joint venture company, PDV Caribe Dominica Ltd., to import and distribute Venezuelan petroleum products. An agreement was also signed in Grenada on June 26 by PDVSA's Granado and Grenada Minister of Energy Gregory Bowen acting in his capacity as the head of PetroCaribe Grenada Ltd., a joint venture company set up several months ago. A June 29 agreement between PDVSA and St. Kitts formed the St. Kitts Energy Company Ltd., a new joint venture company that will reportedly study the creation of a petroleum supply �00A;facility on the island. -------------- Antigua and St. Vincent Could As Well -------------- ¶3. (U) Discussions aimed at establishing similar joint venture companies are reportedly underway with Antigua, according to a PDVSA press release. The June trip by St. Vincent and the Grenadines Prime Minister Ralph Gonsalves to Venezuela, where he reportedly met President Hugo Chavez along with visiting Dominica Prime Minister Roosevelt Skerrit, indicates that a joint venture company could soon be established in St. Vincent as well. -------------- Oil, Arriving Soon -------------- ¶4. (U) In signing the agreement with PDVSA, the Government of Dominica announced that it had identified a site outside of the capital, Roseau, at which it plans to construct, with Venezuelan assistance, facilities to store diesel, gasoline, and liquefied petroleum gas (LPG) supplied by PDVSA. No date was given for the first delivery of these fuels, although Dominica reportedly received its first PetroCaribe-related petroleum product on June 7 when the first of several planned shipments of asphalt arrived from Venezuela. Under the agreement signed in Grenada, PDVSA will reportedly provide an annual supply of 55,000 barrels of diesel, 85,000 barrels of gasoline, and 20,000 barrels of fuel oil. The Government of Grenada (GOG) optimistically expects the first fuel shipment to arrive at some point in the next three months. -------------- Electric Company Kept in the Dark -------------- ¶5. (C) According to press reports, the Grenada agreement was between PetroCaribe Grenada Ltd., GRENLEC, the nation's electric company, and the national airport authority. The agreement was actually between PetroCaribe Grenada and PDVSA, according to Bob Blanchard, Jr., President of WRB Enterprises, Inc., a Florida-based company that owns the controlling share of GRENLEC. The GOG called the Managing Director of GRENLEC, Vernon Lawrence, to a last minute meeting on June 26, where he found himself standing in the midst of the PetroCaribe signing ceremony. The Government announcement that Grenada would soon begin receiving diesel from PDVSA was news to GRENLEC management, as the GOG has not discussed with the electric company the possibility of it using PDVSA diesel to fuel its power plant. ¶6. (C) The situation is similar in Dominica, where the Government has failed to discuss PDVSA supplying diesel to DOMLEC, that country's electric company, in which WRB Enterprises also has a majority share (ref C). Blanchard explained to Poloff that both DOMLEC and GRENLEC could potentially put out tenders for new diesel supply contracts, but the new joint venture companies in Dominica and Grenada would have to compete with other bidders. Unless the joint venture companies could underbid international oil companies, the electric utilities would prefer to stick with Texaco, their current supplier of diesel. Of course, doing business in these small countries could require political compromises, added Blanchard. -------------- OECS Has No Position on PetroCaribe -------------- ¶7. (U) Dominica's, Grenada's, and St. Kitts' separate initiatives to begin receiving Venezuelan petroleum products come shortly after the OECS member states' apparent failure to agree to negotiate as a bloc with Venezuela. The regional press had reported that the OECS reached such an agreement during an April meeting, as well as that the member states agreed to establish a storage area for Venezuelan petroleum in Antigua during a meeting in June 14. ¶8. (C) These reports were erroneous, according to Keith Nichols, who deals with energy issues at the OECS Secretariat, the organization's St. Lucia-based headquarters. SIPDIS The Prime Ministers of the six OECS member states, Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines, discussed both proposals but failed to reach agreement on either. As a result, the OECS currently lacks a common position on PetroCaribe. The member states apparently did attempt to hold a joint meeting with Venezuela, but this "did not come off" for various reasons. There is still a possibility that the Antigua storage facility could be established, in Nichols' opinion. (Note: Post reported previously (ref A) that an oil company representative who attended the April OECS meeting understood that the organization had agreed to the Antigua storage facility proposal and was waiting for Venezuela's agreement. End note.) -------------- Comment -------------- ¶9. (C) The current flurry of activity by Eastern Caribbean governments to establish joint venture companies with Venezuela may be the result of the recent failure of the OECS to reach a common position regarding PetroCaribe. Rather than operating as a bloc, each of the small countries in the region will go it alone in terms of how much of each type of fuel it receives from Venezuela and at what rate. If the OECS and Venezuela ultimately establish a regional storage facility in Antigua, this could bring certain economic advantages. But, as Post has reported (reftels),one of the major problems the small Eastern Caribbean governments face in implementing PetroCaribe is their inability to effectively and economically distribute the Venezuelan petroleum products once they arrive in their respective countries. These governments still face the task of offering lower prices, applying political pressure, or a combination of both, to convince local businesses such as electric companies and gasoline stations to purchase the PetroCaribe fuel from their joint venture companies. KRAMER