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. -------------- ANTIGUA SIGNS ON THE DOTTED LINE -------------- ¶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. -------------- POTENTIAL REPOSITORY PERK -------------- ¶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. -------------- COMMENT -------------- ¶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