NICARAGUA - VENEZUELA MEMORANDUM OF UNDERSTANDING

UNCLAS MANAGUA 000639 SIPDIS SENSITIVE SIPDIS STATE FOR WHA/CEN, WHA/EPSC, EEB/ESC E.O. 12958: N/A TAGS: ENRG EPET EAID NU VE SUBJECT: NICARAGUA - VENEZUELA MEMORANDUM OF UNDERSTANDING ON ENERGY SECTOR COOPERATION BETWEEN PDVSA AND PETRONIC ¶1. (SBU) Summary. As part of a series of Bolivarian Alternative agreements between Nicaraguan and Venezuela signed on January 11, 2007, respective Foreign Relations Ministers signed a Memorandum of Understanding for Energy Sector Cooperation between Petroleos de Venezuela (PDVSA) and La Empresa Nicaraguense Del Petroleo (PETRONIC). The MOU outlines areas for cooperation between PDVSA and PETRONIC, including the formation of joint enterprises engaged in refining, distribution, supply, and marketing petroleum products, the supply of petroleum and refined products, the construction of a refinery in Nicaragua, and the direct supply of gas from Venezuela to Nicaragua via pipeline. End Summary. ¶2. (SBU) The MOU for Energy Sector Cooperation between the Venezuelan Oil Company (PDVSA) and the Nicaraguan Oil Company (PETRONIC) was one of a series of thirteen commitments with Venezuela negotiated by the Ortega government before it came to power on January 10, 2007. PETRONIC President Jose Francisco Lopez and PDVSA President Rafael Ramirez Carreno signed the MOU on January 11, 2007. The substance of the MOU, along with the other commitments made that day, was kept from the public for weeks. This cable reports on an unsigned copy of the MOU. Preambular Language -------------- ¶3. (SBU) Preambular language recognizes the importance of the expansion and intensification of social and economic cooperation between the parties, in consideration of the opportunities that the energy sector offers for cooperation with a major emphasis on the social development. The parties reiterate their political will and interest in encouraging regional energy integration, based upon the principles of cooperation, complementarity, self-determination, shared solidarity between peoples, respect for sovereignty, and the sovereign right to establish criteria that assure the utilization of renewable and non renewable natural resources for the equitable and sustainable development of their peoples. Article 1: Objective -------------- ¶4. (SBU) The objective of this MOU is to establish a general framework for the execution of cooperative activities of mutual interest to PDVSA and PETRONIC in the area of energy. Article 2: Modalities -------------- ¶5. (SBU) With the purpose to put into practice what is foreseen in Article 1, the parties agree to deepen mutual cooperation with a view to continuing the advancement of studies and strategies that may be required to realize development in the following areas: -- formation of mixed enterprises between state enterprises for the development of refining, distribution, supply, and marketing projects for petroleum products, and other objectives of common agreement between the parties. -- construction of a refinery in the territory of the Republic of Nicaragua, with the participation of PDVSA and PETRONIC. -- direct supply of gas to the Republic of Nicaragua via land through a pipeline. -- supply of petroleum and refined products up to the volumes agreed upon by the parties and established mechanisms for payment. -- other forms of cooperation that the parties may agree. Article 3: Competent Authorities -------------- ¶6. (SBU) Competent authorities for the execution of this MOU shall be PDVSA and PETRONIC. Article 4: Control and Oversight -------------- ¶7. (SBU) With the purpose of assuring the prompt execution of this MOU and in as much as agility is required in making decisions, officials of the competent authorities will meet alternatively in the territories of the parties on dates that they decide by common agreement. In this way, executive working groups may be established to effect cooperative relations in the different sectors. Article 5: Utilization of Information -------------- ¶8. (SBU) The parities may freely utilize all information exchanged by virtue of this MOU, except that which a party restricts or places reservations for use or dissemination, or has classified as confidential. In no case will information exchanged by virtue of this MOU be transferred to third parties without prior written consent by the relevant party. Article 6: Financing -------------- ¶9. (SBU) Parties agree that expenses resulting from defined cooperative activities will be born by the party that incurs them, through its competent authority, unless another so agreed in writing. Article 7: Labor Relations -------------- ¶10. (SBU) Personnel commissioned by each party will continue under the direction of the institution to which they belong, so as to not create relations of a labor character with the other party. They shall work under the norms and regulations of the institutions from which they are lent. Such staff will not be able to dedicate themselves to any activity outside of their functions, nor receive remuneration beyond what is established without prior authorization from the competent authorities. Each of the parties is responsible for labor accidents and damages to their own property, independent of the place where it occurs, unless it is a consequence of grave negligence or hurtful conduct, in which case corresponding indemnities should provide cover. Article 8: Third Parties -------------- ¶11. (SBU) This MOU does not confine the parties to any exclusivity, nor does it impede signing other agreements of this type with third parties. Article 9: Modifications and Termination -------------- ¶12. (SBU) This MOU may not be terminated, modified, or any article omitted, without previous written consent indicated by both parties. Article 10: Resolution of Disputes -------------- ¶13. (SBU) Disputes that may arise with because of interpretation or the application of this MOU will be resolved by the parties in a friendly manner through direct negotiations and common agreement. Article 11: Duration, Entry into Force, and Withdrawal -------------- -------------- ¶14. (SBU) The duration of this MOU will be 5 years after having entered into force upon signature, without lessening fulfillment of constitutional and internal legal requirements that each country may have. This MOU will remain in force unless one of the parties communicates to the other its intention to terminate it at least 6 months before the expiration of the agreement. The termination of this MOU does not imply the cessation of agreed upon projects during the period within which this agreement was in force, which may be executed until their culmination unless the parties agree to the contrary. This MOU may be amended by mutual consent of the parties; amendments will enter into force in a form agreed upon by the parties. TRIVELLI