GOH INTENDS TO MEET 100% FUEL DEMAND WITH

C O N F I D E N T I A L SECTION 01 OF 02 PORT AU PRINCE 001905 SIPDIS SIPDIS STATE FOR WHA/CAR WHA/EPSC FOR FAITH CORNEILLE, ED MARTINEZ EB/IFD STATE PASS TO USAID FOR LAC/CAR TREASURY FOR JEFFERY LEVINE COMMERCE FOR SCOTT SMITH E.O. 12958: DECL: 10/04/2016 TAGS: ENRG EPET ECON EAID HA SUBJECT: GOH INTENDS TO MEET 100% FUEL DEMAND WITH PETROCARIBE REF: A. PAP 856 ¶B. PAP 1377 ¶C. PAP 1205 ¶D. PAP 1483 PORT AU PR 00001905 001.2 OF 002 Classified By: Ambassador Janet A. Sanderson for reasons 1.4 (b) and (d ). ¶1. (C) Summary: President Rene Preval and finance minister Daniel Dorsainvil informed the four oil companies operating in Haiti of intentions to meet 100 percent of Haiti's petroleum demand through its Petrocaribe agreement. According to a Christian Porter, country manager for ExxonMobil (operates as Esso in Haiti),the international oil companies were shocked; they thought they would still have the right to import their own oil, with Petrocaribe supplying only part of Haiti's petroleum demand. Of the four companies, only the domestic oil company, Dinasa, which has been asked by President Rene Preval to manage and control Petrocaribe stock, was not surprised by the government's announcement. Dinasa employee Michel Guerrier thinks the President's plan is a long shot at best. Post agrees with Guerrier. Essentially, President Preval is asking the oil companies to operate with petroleum purchased solely from Petrocaribe via the GOH. End Summary. ¶2. (C) Porter told econoff that the President asked the four companies for their position on Petrocaribe supplying 100 percent of Haiti's petroleum: Dinasa (a Haitian oil company) and Total (French) representatives agreed with the proposition, the Chevron (operates as Texaco) representative said it is not his decision, and the ExxonMobil representative said nothing. (Porter explained that Chevron and ExxonMobil were not appropriately represented because Preval called the meeting only the day before and they had not been alerted to the broad scope of the proposal.) According to Porter, Preval took this to be an unofficial agreement between the GOH and the international oil companies, and is now encouraging the oil companies to communicate directly with Venezuela. Porter, speaking for both ExxonMobil and Chevron, stressed that they would not be willing to do this because they would lose their off-shore margins and because of Petrocaribe's unreliable reputation. Under existing arrangements, a tanker arrives every two weeks and its contents are distributed to the four oil companies. Porter noted that Preval did not explicitly prohibit the oil companies from importing oil, at least not yet. ¶3. (C) Michel Guerrier, an employee of Dinasa told econoff October 2 that the government may intend to import 100 percent of Haiti's petroleum through Petrocaribe but Guerrier doubted that this plan would be realized. He said the GOH does not have the means or capacity to manage 100 percent of Haiti's petroleum supply, as seen by their experience with the first 100,000 barrels of Petrocaribe fuel, and thus is looking for help from the oil companies. (Note: The first and only Petrocaribe shipment of 100,000 barrels of refined fuels arrived May 14, but the GOH was unable to completely unload it until mid-August (reftels A and B),and is still having difficulty selling the petroleum to the two interested buyers, Total and Dinasa, because the world market price for oil has since dropped. Storage is at a premium in Haiti, and transportation is difficult and expensive because of poorly-maintained roads. Representatives of the two U.S. oil companies told Ambassador early June that they do not make a profit selling fuel in Haiti; their only profit is through off-shore margins. End note.) ¶4. (C) Comment: The Petrocaribe agreement continues to advance in theory. In practice, however, the agreement has been stalled ever since the initial shipment arrived in May. In discussions with the Ambassador early June, Edouard Baussan (vice-president of Dinasa and Preval's point person on Petrocaribe) agreed with the Ambassador that the GOH was not capable of handling petroleum logistics like insurance, transportation, storage and distribution. He also pointed out that the government is wary of disturbing distribution channels established by the four oil companies (reftel C). It seems that Preval wants to have his cake and eat it too: PORT AU PR 00001905 002.2 OF 002 he has asked that the oil companies participate in the logistical and commercial process, whereby the GOH buys and sells the petroleum (and benefits from the preferential terms of the agreement, which GOH officials estimate will total about USD 100 million per year (reftel D)) and then give responsibility to the oil companies for the management of storage and distribution of the product. This is a dubious proposal that neither the U.S. oil companies in Haiti -- responsible for about 45 percent of Haiti's petroleum imports -- nor Venezuela, for that matter, is likely to agree to. The Ambassador plans to meet with ExxonMobil representatives next week. Post will continue to follow Haiti's plan for implementation of Petrocaribe and update as appropriate. SANDERSON =======================CABLE ENDS============================