PETROCARIBE UPDATE #25: ANTIGUA ESTABLISHES NEW

C O N F I D E N T I A L BRIDGETOWN 001279

SIPDIS

SIPDIS

SOUTHCOM ALSO FOR POLAD

E.O. 12958: DECL: 07/20/2016
TAGS: ENRG EPET PGOV PREL AC VE XL
SUBJECT: PETROCARIBE UPDATE #25: ANTIGUA ESTABLISHES NEW
JOINT VENTURE

REF: A. BRIDGETOWN 1127


B. BRIDGETOWN 877

Classified By: PolOff Shannon E. Runyon for reasons 1.4 (b) and (d).


1. (C) Summary: The government of Antigua and Barbuda
(GOAB) signed a joint-venture agreement with the Venezuelan
National Petroleum Company (PDVSA) on July 14, making it the
latest Caribbean country to enter into such an arrangement
under the PetroCaribe oil accord. This signing establishes
"PDV Antigua and Barbuda," a new government-run entity to
sell and supply Venezuelan fuel to its citizens. Using the
excess oil storage capacity of the West Indies Oil Company
(WIOC),Antigua could become the Eastern Caribbean
distribution center for PetroCaribe fuel. Allowing the WIOC,
a private company, into PetroCaribe is a major departure from
Venezuela's original plan for state-to-state oil transfers
and may open the door for other private companies to take
part in the energy deal. End Summary.

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ANTIGUA SIGNS ON THE DOTTED LINE
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2. (U) On July 14, the government of Antigua and Barbuda
signed a bilateral sales and supply agreement with Venezuela
effectively establishing a new joint venture company, PDV
Antigua and Barbuda. This contract makes Antigua the fourth
OECS country to agree to receive petroleum products through
such an arrangement under the PetroCaribe oil accord, after
Dominica, Grenada, and St. Kitts and Nevis (ref A). St.
Vincent and the Grenadines is reportedly in the process of
negotiating a similar contract. According to Alejandro
Granados, Vice President of the Venezuelan National Petroleum
Company (PDVSA),this latest deal will allow the GOAB to
purchase up to a million barrels of fuel per year from
Venezuela at concessionary financing rates.

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POTENTIAL REPOSITORY PERK
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3. (U) In his remarks at the signing ceremony, PM Baldwin
Spencer noted Venezuelan President Chavez's eagerness for the
deal to be operational by the end of August. To that end,
Granados affirmed Venezuela's intent to provide the GOAB up
to USD 47.5 million to construct any necessary infrastructure
to expedite the agreement. This desire for quick results may
open the door to an agreement for PDV Antigua and Barbuda to
use existing West Indies Oil Company (WIOC) storage
facilities. This "hub and spoke" distribution system would
enable Antigua to serve as the repository and transshipment
point for nearby smaller islands, such as St. Kitts and
Nevis, which do not have adequate storage facilities to
accept large oil shipments and could make the Venezuelan
energy deal more feasible. According to press reports, the
GOAB has a 25 per cent interest in the WIOC, so the deal
would not be in direct conflict with Venezuela's
"government-only" plan for the accord.

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COMMENT
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4. (C) Venezuela has apparently compromised on its
"government-only" plan for PetroCaribe by agreeing to use
WIOC's storage facilities. Chavez's socialist ideal for the
energy agreement has clashed with the economic reality that
these small island states cannot support state-run oil
companies and it makes no sense for them to build storage
facilities that duplicate existing private structures. This
compromise was necessary to counter recent grumblings about
big promises from Venezuela but little or no petroleum
delivery throughout the OECS. It may also provide a
precedent for future private company involvement in the
venture, such as that of Barbados-based SOL (ref B). The
proposed storage and distribution of Venezuelan fuel using
Antigua as a hub would help these small Eastern Caribbean
governments solve one of their biggest logistical problems
with the PetroCaribe deal.
KRAMER