CONFERENCE PROMOTES CARIBBEAN ENERGY DIVERSIFICATION

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SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET EIND EINV CARICOM TD
SUBJECT: CONFERENCE PROMOTES CARIBBEAN ENERGY DIVERSIFICATION

REF: PORT OF SPAIN 1040


1. Summary: Caribbean Energy Ministers met in Port of Spain
September 6-8, 2006, at the "Energy and The Competitiveness of The
Caribbean" conference to discuss opportunities for developing
renewable energy to reduce the region's dependency on foreign oil.
The goal of the conference was to illuminate the challenges,
opportunities and path forward for realizing a more diversified
energy sector in Caribbean countries. Noting current high oil
prices and their impact on the region's development, several
ministers raised concerns over national security and voiced
frustration about a perceived lack of help from the international
community. USG underscored our commitment to be part of the solution
to addressing the region's energy challenges. DOE delivered a
strong message about the need to diversify the region's energy mix
in order to overcome the long-term challenges associated with
petroleum dependence. IDB President Moreno announced the creation
of an Infrafund that will increase funding for energy
infrastructure, as well as other efforts to increasing financing for
Caribbean energy projects. Brazilian officials expressed their
government's willingness to cooperate with the Caribbean on ethanol.
End Summary.

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Conference Dynamic and Key Themes
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2. The Department of Energy (DOE),Government of Trinidad and
Tobago, Inter American Development Bank (IDB),Caribbean-Central
American Action (CCAA),and United Nations Development Program
(UNDP) sponsored the event, which was well-attended by a dozen
Caribbean/CARICOM energy ministers, Aruba's Prime Minister, as well
as financial institutions and regional and U.S. private industry
(international oil companies and suppliers of alternative energy).
USG delegation included DOE, State, OPIC, and USTDA officials.
Information on the conference, including selected presentations, is
accessible on the CCAA website: http://www.c-caa.org/


3. On September 5, immediately prior to the conference, Trinidad and
Tobago Prime Minister Patrick Manning publicly criticized the United
States, claiming that the U.S. is not focusing enough attention to
the region (reftel). In the same speech Manning also criticized
Venezuela's PetroCaribe initiative, warning of negative implications
for regional energy security. While expressing different views on
PetroCaribe (see para 10),Jamaican Foreign Minister Hylton echoed
Prime Minister Manning's criticism of the U.S. in remarks to the
press, noting that U.S. attention in Iraq has side-tracked its
counter narcotics efforts in the region.


4. Trinidad and Tobago Energy Minister Lenny Saith opened the event
September 7, noting Trinidad's key role as a regional energy
supplier and reinforced that his country was doing all it could to
help the Caribbean cope in the high oil-price environment.
Conference discussion focused on reducing Caribbean dependence on
foreign oil through increased renewable energy such as biofuels,
wind, solar, ocean thermal/wave action technologies, and hydro
power. Though some Caribbean countries have already taken steps to
diversify their mix, many conference participants pressed leaders
for further action to promote the production and consumption of
renewables. The conference format promoted full participation of
participants, which allowed Ministers or their representatives to
hear feedback first-hand. Most participants urged Caribbean
officials to develop long-term energy planning and to attract much
needed energy investment through harmonization of legal and
regulatory standards and mandated usage of biofuels, such as ethanol
blending with gasoline. (NOTE: Barbados and Jamaica have followed
the U.S. lead and are in the process of phasing out MTBE. END NOTE)



5. A key concern expressed by Caribbean Ministers was the impact of
high oil prices on development, with Dominica's and St. Vincent and
the Grenadines' energy ministers accusing private industry of price
gouging and failing to help the Caribbean mitigate the impact of
high oil prices. Dominica's Energy Minister launched into a
passionate description of the deleterious socio-economic effects the
high prices were having on the small island nations, criticizing
international oil companies and the U.S. for not helping the region
that, he claimed, faces national security challenges due to high
energy prices. In response, DOE A/S Harbert refuted claims that
international oil companies are price gouging, noting that the USG
recently conducted an extensive investigation into alleged price
gouging in the United States and found no evidence that illegal
pricing activities were taking place. Harbert further explained
that oil prices are determined by supply/demand dynamics in the
world market, that OPEC members are producing above quota in an
effort to bring down prices, and that the vast majority of the
world's oil reserves are controlled by state-owned oil companies,
not private industry.


6. In discussing biofuels, ministers noted the need to balance food

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security with energy security, as increased biofuel production will
place pressure on the agricultural sector. Montserrat's energy
minister pointed to possible social dislocations that may occur if
farmers produce other agricultural goods for biofuels production. A
recurrent theme was the need for the Caribbean to maintain ownership
over production processes. In response to an Exxon-Mobil
representative's assertion that biofuels are not commercially viable
and would require massive subsidies to succeed, a number of
panelists pointed to the economic benefits associated with biofuel
production, as well as other potential benefits including
environmental benefits from cleaner energy, job creation, poverty
reduction, and increased trade.

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Financing
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7. Private financiers, IDB, and the Caribbean Development Bank were
optimistic that private capital is available for energy project, and
they noted their eagerness to identify creditworthy projects. To
help close the gap between available capital and developing stronger
project proposals, IDB President Moreno announced the creation of an
Infrastructure Fund named the "Infrafund." The Infrafund will begin
with US$20 million in grants, and its goal is to provide US$12
billion in investment funds to Latin America and the Caribbean over
five years. Moreno announced that the IDB will partner with Brazil
on ethanol; support biofuels project including small-scale hydro,
wind, and solar projects; commit US$500,000 to fund two Caribbean
focused programs for renewables and energy efficiency; carbon
finance projects for CARICOM; and an environmental and social
assessment of the impact of implementing a regional biofuels
strategy. Caribbean Ministers and other regional representatives
expressed frustration over the difficulty of accessing IDB, GEF and
other IFI funds due to the apparent complexity of rules, arduous
process, and ineligibility in some cases for applying to available
funds. (NOTE: Jamaica and Trinidad & Tobago are members of the
IDB, but nonmember countries can only access IDB funds through the
Caribbean Development Bank. END NOTE)

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Regional Cooperation
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8. Through CARICOM's Energy Task Force, the region has drafted a
regional energy plan or blueprint that the Task Force intends to
present to CARICOM Heads of Government in February 2007. Several
participants expressed concern over how best to balance national
energy planning within the regional context. CARICOM Energy Task
Force Chairman Andrew Jupiter stated that the Task Force was
committed to developing an overall energy strategy within which each
individual member would be able to fit its specific energy policy.
However, a recurring theme of the conference was the lack of
regional planning, with some Ministers expressing the view that the
CARICOM Energy Task Force was ineffective and needs to be
revitalized.


9. Brazilian officials from the Ministry of Energy and Mines
presented the Brazilian ethanol experience, which provided an
excellent example of long-term and multi-sectoral planning to
develop biofuels. Some noted that Brazil has been working the
biofuels issue for more than 30 years, so the Caribbean has quite a
ways to go. Antonio Simoes, Director of Energy for the Brazilian
Ministry of Foreign Affairs, enthusiastically underscored Brazil's
desire to cooperate with the Caribbean, stating "We are not here to
sell you anything, we honestly want you to help you become ethanol
producers and exporters because we cannot meet projected world
demand by ourselves."

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PetroCaribe
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10. While acknowledging that PetroCaribe is not a substitute for
long-term planning, Jamaican Foreign Minister Hylton claimed it is a
short-term option that provides "breathing room" and relief to
foreign exchange reserves. Though PetroCaribe was not an explicit
central theme during discussion, press coverage focused on the
initiative and Hylton's remarks. The overall structure of the
conference did, however, address the crux of the PetroCaribe issue
by advocating for long-term solutions to oil dependence over
short-term fixes. In her remarks to the conference and in
discussions with the press, DOE Assistant Secretary Harbert
emphasized that PetroCaribe may hold appeal in the short run by
appearing to provide some initial economic relief for governments
but in the long term, it is an obligation that is carried on the
government books and that the taxpayers and citizens of these
nations will have to repay. Harbert also noted that Venezuela's oil
deals do not affect the retail prices of petroleum products, so
PetroCaribe is not providing any relief for consumers.


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11. COMMENT: Caribbean officials initially expressed disappointment
that the U.S. had not arrived with ready-made solutions and funding.
However, by the end of the event our message - that sustainable
solutions would come from each country putting together the
structures and policies that encourage the private sector to invest
- seemed to have greater resonance. Companies reported good access
to decision makers. Many of the small alternative energy firms
reported good progress with ministers in raising interest and
awareness for their services, as well as having gleaned much useful
information on how to penetrate Caribbean markets. Caribbean
governments now need to take further action to encourage the growth
of renewables. Though skeptical to a degree, the ministers were
eager to learn more about how to proceed and to better understand
the social and economic benefits and challenges that come with
alternative energy resources and biofuel production and use. The
event underscored the need to build technical capacity in the
region, in order to help understaffed and under-funded ministries
take advantage of private sector interest and financing which
currently stand just beyond their technical ability to access. The
conference was a good first step in building a stronger relationship
with Caribbean countries that are committed to improving their
energy and economic security through a diversified energy portfolio.
The USG should continue to press the importance of diversification
of energy supply with Caribbean governments and to look for
practical ways and capacity-building options to assist the region.
End Comment.


12. DOE delegation members provided input for this report.

AUSTIN