GOP SCHIZOPHRENIC ON VENEZUELAN FUEL IMPORTS

C O N F I D E N T I A L PANAMA 001999

SIPDIS

SIPDIS

E.O. 12958: DECL: 09/21/2016
TAGS: PREL PGOV PTER UNSC MOPS PHUM ARABL EG SU
SUBJECT: GOP SCHIZOPHRENIC ON VENEZUELAN FUEL IMPORTS

REF: A. PANAMA 1293

B. PANAMA 1213

C. PANAMA 1518

Classified By: Deputy Chief of Mission L. Arreaga for reasons 1.4 (b) a
nd (d)


1. SUMMARY. (C) GOP Energy policy remains divided as the
Ministry of Industry and Commerce (MICI) pursues divergent
paths to ensure an affordable supply of petroleum for Panama.
MICI Vice-Minister Jose Paredes stated publicly that the new
Panamanian state run oil company would not distribute fuel,
but serves as the vehicle by which the GOP could negotiate a
refinery, importation of gas and fuel, and join regional
energy initiatives with Central America, Colombia and
Venezuela (Refs A & B). A high-ranking MEF official,
however, told Econchief that he expects nothing substantive
to come of the talks with Venezuela nor the GOP's proposed
company. MICI announced in July that fuel storage capacity
would be made available to the Venezuelan-Panamanian
consortium, Lucky Petrol and Codetrap (Ref C) via tanks that
are currently part of a GOP concession to Chevron.
Chevron-Texaco country manager confirmed to Econoff that its
Fuel and Marine Marketing (FAMM) division is negotiating with
MICI to transfer 11 of its 19 tanks in Panama to the GOP.

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VENEZUELAN FUEL: IT'S ALL ABOUT THE TANKS
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2. (SBU) Codetrap (Ref C) representatives say they expect an
initial shipment of 40,000 barrels of gas and diesel from
Venezuela, with subsequent shipments reaching the authorized
quota of 250,000 barrels. The Secretary of the
Venezuelan-Panamanian Chamber of Commerce told the press that
the elimination of the middleman would result in fuel prices
15% below the current market. Industry sources told Econoff
that to their knowledge, no such shipments have occurred or
are scheduled to occur. In order to receive such a shipment,
Codetrap needs storage facilities for the fuel.


3. (C) A Chevron-Texaco (C-T) executive told Econoff that its
FAMM division owns 19 tanks in Panama, all located on GOP
leased land. Five are in Cristobal (Atlantic Coast) and
fourteen in Balboa (Pacific Coast). C-T is currently using
five (all located in Balboa). Three tanks are scheduled to
be demolished, having been out of service for more than 30
years. The C-T executive told Econoff that the remaining 11
tanks are noncompliant with environmental and C-T corporate
guidelines and that FAMM presented a formal proposal to MICI
in mid-August to transfer the tanks to the GOP. FAMM and a
C-T environmental team are currently working in parallel to
prepare them for the transfer. The C-T executive did not
provide an estimate of when the tanks might be operational.

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OIL EXECUTIVES TROUBLED BY POSSIBLE GOP RUN COMPANY
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4. (SBU) Petroleum industry representatives met with Paredes
in July to express their concerns about the legislation
authorizing the creation of a state run petroleum company.
The American Chamber of Commerce Hydrocarbons committee sent
a formal letter to Minister of Trade Alejandro Ferrer in
August. The letter highlighted the destabilizing impact of a
state run company on Panama's free market investment climate,
the unfair competition, the low fuel prices enjoyed by Panama
compared to its neighbors, the historical ineffectiveness of
state run fuel companies in Latin America to deliver
competitive prices, and the stability and security of fuel
supply enjoyed by Panama from its private sector hydrocarbons
suppliers. Industry representatives told Econoff that have
yet to receive an adequate reply from the GOP. A senior MEF
official told Econchief that the GOP recognizes the inherent
conflict in regulating a market in which they are a
participant. He does not expect any substantive development
of the state run company.

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COMMENT
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5. (SBU) GOP energy policy continues to be managed
incohesively across two ministries. Although some GOP
leaders appear anxious to pursue Venezuelan fuel imports and
an active GOP involvement in the market, others continue to
seek a private sector solution. Although the average
Panamanian citizen would probably view fuel from Venezuela
favorably, it is unlikely this can occur prior to the October
22 Canal referendum given the refurbishment needed by the
proposed storage tanks.
EATON