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.

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Dominica, Grenada, and St. Kitts Make Deals
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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
facility on the island.

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Antigua and St. Vincent Could As Well
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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.

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Oil, Arriving Soon
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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.

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Electric Company Kept in the Dark
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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.

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OECS Has No Position on PetroCaribe
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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.)

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Comment
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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