Identifier
Created
Classification
Origin
06TEGUCIGALPA1393
2006-08-04 23:16:00
SECRET//NOFORN
Embassy Tegucigalpa
Cable title:  

(C) HONDURAS: RECENT HONDURAS ENERGY DISCUSSIONS

Tags:  PINR EPET PGOV HO VE 
pdf how-to read a cable
VZCZCXRO1362
OO RUEHLMC
DE RUEHTG #1393/01 2162316
ZNY SSSSS ZZH
O 042316Z AUG 06
FM AMEMBASSY TEGUCIGALPA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2900
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEHBU/AMEMBASSY BUENOS AIRES PRIORITY 0097
RUEHCV/AMEMBASSY CARACAS PRIORITY 0411
RUEHME/AMEMBASSY MEXICO PRIORITY 6648
RUEHFR/AMEMBASSY PARIS PRIORITY 0272
RUEHUNV/USMISSION UNVIE VIENNA PRIORITY 0046
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC PRIORITY 0442
S E C R E T SECTION 01 OF 08 TEGUCIGALPA 001393 

SIPDIS

NOFORN
SIPDIS

STATE FOR EB/ESC, WHA/EPSC, WHA/PPC, AND WHA/CEN
STATE FOR D, E, P, AND WHA
STATE FOR INR/I JGIBNEY
TREASURY FOR JHOEK
STATE PASS AID FOR LAC/CAM
NSC FOR DAN FISK

E.O. 12958: DECL: 08/04/2031
TAGS: PINR EPET PGOV HO VE
SUBJECT: (C) HONDURAS: RECENT HONDURAS ENERGY DISCUSSIONS
WITH VENEZUELA (C-AL6-01066)

REF: A. A. TEGU 000482

B. B. TEGU 000521

C. C. TEGU 000534

D. D. TEGU 000505

E. E. TEGU 001008

F. F. TEGU 001131

G. G. TEGU 001238

H. H. TEGU 000809

I. I. TEGU 000897

J. J. 05 TEGU 001851

K. K. 05 TEGU 001970

L. L. 05 TEGU 002577

M. M. STATE 124888

Classified By: AMB Charles Ford for reasons 1.4 (b) and (d)

S E C R E T SECTION 01 OF 08 TEGUCIGALPA 001393

SIPDIS

NOFORN
SIPDIS

STATE FOR EB/ESC, WHA/EPSC, WHA/PPC, AND WHA/CEN
STATE FOR D, E, P, AND WHA
STATE FOR INR/I JGIBNEY
TREASURY FOR JHOEK
STATE PASS AID FOR LAC/CAM
NSC FOR DAN FISK

E.O. 12958: DECL: 08/04/2031
TAGS: PINR EPET PGOV HO VE
SUBJECT: (C) HONDURAS: RECENT HONDURAS ENERGY DISCUSSIONS
WITH VENEZUELA (C-AL6-01066)

REF: A. A. TEGU 000482

B. B. TEGU 000521

C. C. TEGU 000534

D. D. TEGU 000505

E. E. TEGU 001008

F. F. TEGU 001131

G. G. TEGU 001238

H. H. TEGU 000809

I. I. TEGU 000897

J. J. 05 TEGU 001851

K. K. 05 TEGU 001970

L. L. 05 TEGU 002577

M. M. STATE 124888

Classified By: AMB Charles Ford for reasons 1.4 (b) and (d)


1. (S/NF) The following responds to tasker C-AL6-01066
transmitted ref M. All responses are keyed to questions
contained in reftel and repeated below.


A. (U) PRESIDENT ZELAYA.

1) (C) WHERE DOES ZELAYA STAND WITH RESPECT TO THE
VENEZUELA OIL TALKS? WHAT ARE HIS MOTIVATIONS FOR
INVOLVEMENT ON THE ISSUE -- E.G., POLITICAL, FINANCIAL
(PERSONALLY OR OTHERWISE)?

President Zelaya strikes us as a well-meaning populist, but
susceptible to leftist influences as political pressures
mount in a chaotic atmosphere of high public expectations.
Six months into his presidency, Zelaya retains a high (60
percent) approval rating, but his support appears soft as he
careens through crises involving demands from teachers,
health workers, national registry personnel,
environmentalists, and others, and growing public concern
over high energy costs, corruption, and violent crime. In
his stubborn style, Zelaya has alienated much of the
political establishment, including his Vice President, the
former Liberal Party President, much of the press hierarchy,
and many business leaders. Averse to making tough decisions,
Zelaya prefers to push issues down the road, hoping to buy
time. Overly self-assured and a selective listener, Zelaya
will need to decide in coming months whether to continue
relying on a handful of pro-Sandinista and pro-Chavez inner
circle advisors, or to appoint competent technocrats who can

run his government.

Zelaya credits his election to his campaign promise to lower
gas pump prices. Inexperienced in governing and not
academically prepared, Zelaya has reached for what he
considers to be the quickest fix to the oil price problem: a
deal with Venezuela. We believe his motivation rests
primarily with a benign desire to reduce poverty through
lower gas prices, but his position lacks sound economic
analysis and has been strongly influenced by his pro-Chavez
advisors. A second school of thought that we have been
unable to confirm is that Chavez was a contributor to the
Zelaya campaign which accounted for Zelaya,s campaign
promise to lower gas prices and his rush to meetings with
Chavez early in his tenure.

A traditional &Caudillo8 from the rural heartland, Zelaya
resents opposition to his decisions and remains sensitive to
historical Honduran dependency on the United States ) a
relationship that he nevertheless genuinely wants to nurture.
Given his apparent willingness to confer with corrupt former
President Cajellas regarding the oil deal, we do not discount
Zelaya,s interest in personal financial gains from a
Venezuelan deal, but this is probably not his prime
motivation. We also think Zelaya may have been overwhelmed
by the sensational attention showered on Chavez, whom he met
in Vienna and Santiago. Lacking a personal agenda and a

TEGUCIGALP 00001393 002 OF 008


rather shallow and non-strategic thinker, Zelaya does not
appear to grasp the larger geo-political threat posed by
Chavez.

Zelaya,s chaotic management style reflects his life-style.
His father spent seven years in prison; one brother was
murdered in a getaway car; another brother may currently be
hiding from narco-associates; his wife lives apart from him;
his chief advisor, Sandinista sympathizer Patty Rodas, is
rumored to have an amorous, but tumultuous relationship with
him.

Despite Zelaya,s peculiar character, we believe we can work
with him and with others who can help shape his policies. We
have engaged Zelaya directly on many occasions and he has
reciprocated by speaking eloquently at our Independence Day
celebration, personally welcoming a U.S. warship, and
visiting the Residence on several occasions for candid
discussions on immigration, drugs, the White House visit,
etc. At the same time, we have worked intensely with
pressure groups ) the press hierarchy, religious groups,
business leaders, labor leaders, congressional and political
party operatives, human rights activists and others - who
might contain and help manage Zelaya. We continue to enjoy
considerable cooperation on military, drug, and immigration
issues and we are pressing for judicial reform and greater
business competitiveness to attract foreign investment,
create jobs, and reduce poverty.

With careful and frequent counsel and pressure from
like-minded Hondurans, we hope to encourage Zelaya to respond
more fully to U.S. interests. But, our success will depend
on whether Zelaya continues to manage by crisis ) much of
which may be deliberately fomented by his closest confidants
who have little faith in building democratic institutions and
would prefer an ill defined government by popular will. If
he continues to govern in this manner, various alienated
groups both within and outside his party could increase
pressure on Zelaya to replace much of his current government
with less ideological, more competent technocrats. In any
event, reliance on remittances from Hondurans residing in the
U.S., trade ties based on CAFTA, dependence on U.S. military
support to ensure national sovereignty, and historic
bilateral relations will ensure our continued close bilateral
ties ) polls show current approval of the U.S. standing at
over 70 percent. The road, however, will likely be uneven
and there is a strong possibility that he will make poor
decisions on oil and fiscal issues while striving to maintain
good relations with the U.S.
2) (C) HOW DOES ZELAYA MANAGE HIS TEAM ON THIS ISSUE? ARE
THERE MULTIPLE HONDURAN FACTIONS INVOLVED IN NEGOTIATIONS?
DOES ZELAYA PROVIDE CLEAR AND CONCISE DIRECTIONS? IS HE
INTERESTED IN SEEING THE BID SOLICITATION TAKE PLACE AND DO
SO IN A TRANSPARENT, FAIR PROCESS?

There appear to be at least three factions involved in the
fuel import bid solicitation issue. One, led by Presidential
Advisors Patricia Rodas and Enrique Flores Lanza, appear
intent on a more left-leaning policy, including closer
relations with Venezuela. They likely also hope to use soft
financing from a fuel deal to increase GOH subsidies and
other social spending in the hopes of creating a legacy for
the Liberal Party, enabling it to win the next several
elections.

A second faction, led by Juliette Handal, seeks to break the
backs of the International Oil Companies (IOCs) in Honduras
in an attempt to lower fuel prices at the gas pumps. Handal
appears motivated by political opportunism and is widely
thought to be seeking the Presidency. Others, such as
independent gasoline retailers association ADHIPPE, support
the effort as a means to gain additional contract flexibility

TEGUCIGALP 00001393 003 OF 008


and possibly lower prices from their suppliers, all while
safeguarding their bloated (but guaranteed) profit margins.
Yet others in this strange-bedfellows coalition support lower
prices as a social justice concern -- Catholic Cardinal
Andres Rodriguez and several Evangelical pastors fall into
this group. Their support seems predicated on the incorrect
belief that either the GOH or the IOCs can control oil
prices, and that therefore high pump prices must be
indicative of exploitation of the Honduran poor.

A third faction, represented by Adrien Reca but likely
including former President Rafael Leonardo Callejas and
others, are in it for the money. They see a USD 1 billion
contract in the offing, and are desperately maneuvering to
get a commission of some kind from that deal.

Henry Arevalo, owner and President of Honduran gasoline
distributor DIPPSA, appears to be an outlier. He has been
forced by circumstance to seek a buyer for his company.
While he clearly wants the best possible price, he wants to
avoid aligning himself with any of the three factions listed
above. His resultant acrobatics have on several occasions
left both participants and observers convinced there was a
deal when in fact no deal had yet been concluded.

3) (C) ARE ZELAYA AND HIS TEAM CONCERNED ABOUT THE
GOVERNMENT'S RELATIONSHIP WITH THE INTERNATIONAL FINANCIAL
INSTITUTIONS? WHAT IS HE DOING TO MAINTAIN THAT
RELATIONSHIP? WHERE DOES THE ADMINISTRATION STAND WITH
REGARD TO MAINTAINING DEBT RELIEF SCHEDULES? WHAT ADDITIONAL
INSIGHTS DOES POST HAVE ON THE MOVE OF HUGO NOE PINO TO BE
THE REPRESENTATIVE TO THE INTER-AMERICAN DEVELOPMENT BANK
(IDB)?

Zelaya and his team profess to care deeply about the GOH
relationship with the IFIs, but lack the political courage to
make the difficult domestic decisions necessary to comply
with the GOH/IMF agreement. A plethora of subsidies and
other handouts, possibly including a significant upcoming pay
hike for teachers, lead international observers to question
the Zelaya team's dedication to fiscal discipline in general,
and to meeting its Fund requirements in particular.

Zelaya is clearly anxious, however, to acquire up to USD 1
billion in additional debt relief from the Interamerican
Development Bank (IDB). Post urges that any such future debt
relief should be predicated upon continued strong fiscal
performance, not prior HIPC debt relief. Under these
criteria, there is reason to doubt whether the GOH would
qualify for additional debt relief.

Zelaya's Minister of Finance, Rebecca Santos, is a staunch
believer in fiscal discipline, and has reportedly warned the
administration repeatedly of the risks it runs with
uncontrolled spending. However, despite (or perhaps because
of) being a close personal friend of President Zelaya, Santos
has thus far been unable to curb his reflexive tendency to
restore social order by increasing government subsidies.
This has had the lamentable consequence of teaching Honduran
interest groups that if they take to the streets, the GOH
will pay them off. (Biographical Note: To Post's knowledge,
Minister of Finance Rebecca Santos is unrelated to wife of
the Vice President Rebecca Santos. End Note.)

Please see Teguc 1131 for Post's best assessment of the
condition surrounding former Minister of Finance Hugo Noe
Pino's departure. While Noe Pino's diplomatic and economic
experience could indeed prove crucial in future talks over
IDB debt relief (Noe Pino's nominal reason for leaving the
Ministry),Post suspects the public rift between Zelaya and
Noe Pino over teachers' wages was also a contributing factor.
Noe Pino flatly refused the teacher's exorbitant demands,

TEGUCIGALP 00001393 004 OF 008


citing fiscal inability to pay. Zelaya sought instead to
placate the teachers, and has subsequently promised to meet
all benefits obligations and give them substantial wage hikes
as well. One consequence (in addition to Noe Pino's
departure) has been an emboldened and intransigent teachers'
union, which has recently launched a series of disruptive
strikes and threatened to "paralyze" the country.


B. (C) OTHER ACTORS: IT APPEARS THAT NUMEROUS CHARACTERS
FROM BOTH INSIDE AND OUTSIDE THE GOVERNMENT ARE INVOLVED IN
THE DEAL, BUT THEIR MOTIVES, INTERRELATIONSHIPS, AND
SOMETIMES EVEN THEIR IDENTITIES REMAIN UNCLEAR.

1) (C) WHO ARE OTHER KEY PLAYERS AND WHAT ROLE/INTERESTS DO
THEY HAVE IN THE ISSUE? DO THESE FIGURES COORDINATE THEIR
EFFORTS, OR ARE THEY REPRESENTING DIFFERENT INTERESTS? WITH
WHOM DO THEY ALIGN THEMSELVES (ZELAYA, THE BUSINESS SECTOR,
PARTY FIGURES?)

See reftels for Post's best assessment of the players and
their motivations. A brief summary follows:

President Manuel Zelaya Rosales: originally sought to reduce
prices as an election gimmick; later likely enamored of
possible easy money from PetroCaribe soft financing.
Dubiously claims to seek long-term market liberalization. In
the mean time, he's gone too far with the fuel solicitation
to turn back now without severe political repercussions.

Vice President Elvin Santos: Publicly and privately opposes
any deal with Venezuela; has increasing doubts about the fuel
solicitation. Vocally favors market-driven solutions, but
carries little weight on this issue within the GOH.

Patricia Rodas: Liberal Party President, Zelaya's closest
advisor. Leftist by orientation, likely supports deal with
PDVSA as mechanism for closer relations between GOH and GOV;
likely also welcomes Chavez support for Sandinistas in
upcoming Nicaraguan elections. Suspected of abiding (or even
fomenting) social chaos and bureaucratic stagnation as means
of spurring crises to support her claims that the current
socio-political system is broken and must be overturned, not
tweaked.

Milton Jimenez: Minister of Foreign Relations; also leftist,
appears to support closer relations with Chavez; was visibly
distressed when leftist candidate Lopez Obrador lost the
Mexican Presidential election. A close advisor to President
Zelaya, but not a leading actor in the fuel solicitation.

Enrique Flores Lanza: Legal Counsel to the Presidency; third
of four left-leaning advisors closest to President Zelaya,
lead official on fuel solicitation. Clearly sought to steer
early energy policy toward Venezuela, deeply resents USG
efforts to prevent this non-transparent outcome. Unreliable
and untrustworthy as an interlocutor. Perhaps the biggest
threat to U.S. investments in the Honduran fuel sector.

Aristides Mejia: Minister of Defense; fourth of the
left-leaning inner circle. More moderate in outlook;
generally pro-U.S.; not known to be deeply involved in the
fuel solicitation process.

Juliette Handal: former Minister of Trade, leader of the
"Patriotic Coalition" -- a group that has pressed for years
for structural reform to the fuel sector, in the belief that
"transnational" companies are exploiting Honduras. Seems
genuinely to believe that the state taking control of the
sector through nationalization is the best solution; opposes
sector liberalization because one likely result would be that
uncompetitive gas stations would go out of business. Post
assesses she is less a socialist than just deeply confused

TEGUCIGALP 00001393 005 OF 008


about market economics. Widely assumed she wants to be
President of Honduras. Prone to populist rhetoric largely
divorced from the facts; as a result, she is one of the most
popular figures in Honduras today. Empowered by Zelaya's
weak policies, Handal has become a threat to his
administration, mobilizing street protests and raising fears
of further social unrest.

The Notables Commission: A group of eight high-profile
civilians (including Juliette Handal) named by Congress in
October 2005 to investigate reform of the fuel import and
distribution pricing formula. (Note: All fuel prices are
set by the GOH. End note.) Several members dropped out when
the project became politicized; only 2 signed the final
report recommending nationalization of imports. None of the
members have any experience or expertise in the petroleum
sector. Commission hearings were private, and the final
report was never publicly released. The commission also
failed in its mandate to look for reforms to the pricing
formula that could lower pump prices, focusing early and
almost exclusively on nationalizing imports and blaming the
IOCs.

Adrien Reca: an extremely aggressive entrepreneur (some
would say con-man),possibly fronting for GOV interests.
Has sought for several months to broker a deal with PDVSA,
and more recently has sought to engineer the purchase of
DIPPSA (again, possibly on behalf of GOV interests).
Believed also to be representing the interests of corrupt
former President of Honduras Rafael Leonardo Callejas. Post
assesses Reca and Callejas are interested primarily in the
profits and commissions such a deal could generate.

Henry Arevalo: Founder and President of DIPPSA; increased his
40 percent share in DIPPSA to 100 percent in early 2006 when
partner Jose Lamas sold out. Some observers suggest this
purchase (approximately USD 60 million in total) overextended
him financially, explaining his urgency to sell all or part
of the firm. Post assesses that Arevalo is not involved in
either the political or financial plots involving fuel
imports. However, he has in the past misrepresented certain
facts, which Post assesses was an attempt to keep as many
options open as possible while seeking to sell his company at
the highest price without incurring the wrath or either the
USG or GOH.

Yani Rosenthal: Minister of the Presidency; Privately claims
he opposes any deal with Venezuela, but publicly has been an
active participant in presenting and supporting the fuel bid
solicitation. Often refers inquiries on this issue to Flores
Lanza. Post assesses he is carrying out his President's
instructions, but trying not to be standing too close in case
all of this explodes.


C. (U) DEAL-SPECIFIC QUESTIONS.

1) (C) HOW IS THE STATE ELECTRICITY COMPANY, ENEE, INVOLVED
IN THE TALKS WITH VENEZUELA'S PDVSA AND WITH HONDURAN FUEL
DISTRIBUTOR DIPPSA?

ENEE is primarily a purchaser of electricity from
privately-run electricity generators, overwhelmingly
thermo-electric (diesel or bunker fuel fired). ENEE is thus
not a major direct buyer of fuel imports (though fuel prices
are passed through to ENEE and thence to consumers).

However, rumors persist that ENEE Director Leon Starkman has
been trying to arrange a direct-purchase deal for ENEE with
PDVSA. It is known that Starkman was in attendance at the
July 8 secret meetings with PDVSA. How ENEE could use such a
deal to its advantage remains unclear. One suggestion is
that ENEE could sell fuel at a discount to generators, in

TEGUCIGALP 00001393 006 OF 008


exchange for writing down over USD 100 million in payments
arrears ENEE still owes them. In effect, ENEE would, under
this scheme, be using Petrocaribe financing as a long-term,
low-interest loan to consolidate and restructure its debt to
the private sector. Two major power generators (Freddy
Nasser and Schucry Kafie) told Post separately that they
would not accept such a deal, noting both that they have
existing long-term supply contracts and that they fear the
quality of the fuel that would be delivered could be off-spec
(as has happened in other countries using PDVSA or
Petrocaribe).

Post is unaware of any special relationship between DIPPSA
and ENEE. Many have speculated that were ENEE to arrange for
a direct deal with PDVSA, DIPPSA's import terminal in San
Lorenzo would be used for the shipments. However, former
DIPPSA owner Jose Lamas reports that the offloading collars
and pipes at that terminal are too narrow to offload bunker
fuel. Lufusa's storage facility, co-located in San Lorenzo,
is equipped for handling bunker fuel, but it is unclear that
Lufusa would have an interest in allowing GOH use of those
facilities. Lufusa has reportedly approached or was
approached by PDVSA to arrange a direct import deal on
preferential financing terms similar to those offered to FSLN
mayors in El Salvador. It is Post's understanding that this
approach was rebuffed (press reports indicate PDVSA spurned
Lufusa; Lufusa claims it was they that rejected the offer).

2) (C) WHAT ROLE DOES THE BUSINESS COMMUNITY HAVE IN THE
ISSUE? WHAT IS THE POTENTIAL IMPACT OF A PDVSA OIL DEAL ON
US AND MULTINATIONAL OIL COMPANIES?

Companies that are major consumers of energy generally favor
any GOH measure to reduce the cost of energy or fuel to the
final consumer. That said, private-sector umbrella group
COHEP has vocally opposed nationalization or expropriation of
existing energy sector investments, citing the strong
negative impact such actions would likely have on future
investment flows.

U.S. firms Esso (ExxonMobil) and Texaco (ChevronTexaco)
currently have rights to import fuel into Honduras and market
it. (Note: As part of this bid solicitation process, the GOH
has raised a legal technicality to question the firms' rights
to import fuel. End Note.) Both firms are owners of
substantial infrastructure, including service stations and
import/storage facilities. Esso, for example, reports over
USD 30 million in direct investment in service stations and
other infrastructure in the last five years alone. The
current GOH plan could strip these firms of their rights to
import, and the GOH stated intent to build a DBOT (Design,
Built, Operate, Transfer) storage facility of over 2 million
barrel capacity threatens to leave these firms' storage
investments stranded. (The American citizen consultant to
the bid tender, when asked about this outcome, replied that
as far as he was concerned the companies could "sell their
tanks for razor blades.") Loss of the ability to import
freely also jeopardizes these firms' profit margins, and
could force them to abrogate existing contracts with both
suppliers and consumers.

3) (C) HOW MANY GAS STATIONS DOES DIPPSA HAVE IN HONDURAS?
HOW DOES THAT NUMBER COMPARE WITH THE MAJOR OIL COMPANIES?
(NOTE: PREVIOUS INFORMATION HAS SHOWN 98 FOR TEXACO AND 68
FOR ESSO.)

According to DIPPSA's website (www.dippsa.net),DIPPSA has
"more than 100" service stations, making it the largest
single operator of gasoline stations in Honduras. DIPPSA's
share of the market is approximately one quarter.

According to the 2005 Notables Commission on Fuels Report

TEGUCIGALP 00001393 007 OF 008


number 1, there are 420 service stations in Honduras.
According to report number 3, there are 413 stations, broken
down as follows:

DIPPSA 106
ESSO 68
SHELL 74
Texaco 100
Hondupetrol 20
Puma 28
"white flag" 55

Post notes that this list totals 451 stations. Post is
unable to explain this discrepancy in the reports.

According to a Texaco source, Texaco owns, operates, or
licenses 98 service stations, and Esso 68. According to this
source, there are 432 service stations in Honduras. He
estimated that an additional 17 percent of the market is
composed of "white flag" (independent) gasoline stations.


D. (U) GENERAL ENERGY QUESTIONS.

1) (C) PLEASE PROVIDE INFORMATION ON ENERGY CONSUMPTION IN
HONDURAS, INCLUDING THE FOLLOWING, TO HELP ANALYSTS
UNDERSTAND THE POTENTIAL IMPACT OF ANY DEAL WITH VENEZUELA.

A) (U) HOW MUCH GASOLINE, DIESEL, BUNKER, COAL, AND NATURAL
GAS DOES HONDURAS CONSUME?

Honduras produces no petroleum products. Total consumption
is equal to total imports for these products. According to
figures supplied by industry sources, in 2005 Honduras
imported approximately 15.7 million barrels of
petroleum-derived products, as follows (in thousands of bbl):

Avgas 1.5 0.01 percent
Turbo 196.4 1.25
ROM 95 2599.9 16.56
ROM 87 195.1 1.24
Diesel 5446.4 34.69
Kero 218.2 1.39
Bunker C 6313.8 40.21
Asphalt 107.8 0.69
LPG 451.8 2.88
Oils 163.1 1.04
Grease 7.1 0.05
Total 15700.9 100.00

Post has no figures on coal consumption. To Post's
knowledge, no significant electricity is coal-generated; all
coal imports would therefore supply industry, notably
including steel and cement.

B) (U) HOW IS ELECTRICITY GENERATED?

According to information provided by state-run electric
company ENEE to the Honduran Investment and Trade Development
Foundation (FIDE),in 2004 Honduras generated 4842 GWh of
electricity, from the following sources:

Hydro 1430 GWh 29.5 percent
Diesel/Bunker 3118 64.4
Gas Turbines 267 5.5
Cogeneration 27 0.6
Total 4842

Of which:

State-owned 1384 28.6
Privately-owned 3458 71.4


TEGUCIGALP 00001393 008 OF 008


C) (U) WHERE DO THE CURRENT SUPPLIES OF REFINED PRODUCTS
COME FROM?

Honduras has no domestic refining capacity and therefore
imports no crude oil, only refined products such as diesel
and gasoline. According to GOH Ministry of Trade figures,
Honduras imported just over 600,000 barrels of refined
petroleum products from Venezuela in 2003, or roughly 1,650
barrels per day. As such, Venezuela is the direct source of
just 4.2 percent of Honduras, petroleum imports, but
Venezuelan fuel refined in Curacao would add another 19
percent of total imports, to about 23 percent. It,s unclear
how much (if any) of the 44.8 percent supplied by the United
States may be sourced from PDVSA,s Citgo subsidiary. The
other major supplier is Trinidad and Tobago (13 percent).
Honduran importers are currently all private-sector firms,
though the GOH in early 2006 took steps to nationalize all
imports and form a GOH entity to procure and import all fuel
needs.

D) (U) WHO OWNS THE STORAGE FACILITIES IN COUNTRY, WHERE
ARE THEY LOCATED, AND WHAT ARE THE CAPACITIES?

On the Atlantic Coast there are 91 tanks, as follows:

Texaco: 34 tanks 824,336 bbl Puerto Cortes
Gas del Caribe: 32 tanks 42,131 bbl(LPG) Omoa
Honduperol: 11 tanks 313,000 bbl Puerto Cortes
DIPPSA: 14 tanks 417,500 bbl Tela
Atlantic Total: 91 tanks 1,596,967 bbl

On the Pacific Coast there are 18 tanks, as follows:

DIPPSA: 10 tanks 420,000 bbl San Lorenzo
LUFUSA Power Co: 8 tanks 501,318 bbl San Lorenzo
Pacific Total: 18 tanks 921,318 bbl

A more specific breakdown of the tanks by type of fuel stored
is available in the Terms of Reference document, Annex VII,
which can be downloaded at
www.presidencia.gob.hn/casapresidencialweb.ht m under the
Boletines de Prensa section for the month of July. Below the
heading "Licitacion DBOT para Terminal de Almacenamiento"
click on "ver noticia completa" and scroll to the bottom of
the page. The document is available in both English and
Spanish. Note that document also contains rudimetary
information on ports, including maximum vessel size and draft.

Ford

FORD