Energy cooperation sets ‘example’ for regional integration

by Patricia Grogg


HAVANA, Cuba, December 21, 2007 – Cuba and Venezuela are hoping to reinforce their integration strategies at a summit this week through the example of Petrocaribe, a regional energy cooperation agreement that protects less developed countries in the Caribbean from the full impact of today’s soaring oil prices.


Analysis of their common efforts to consolidate Petrocaribe as a model of cooperation in the region is one of the main objects of the meeting of heads of state and government of the countries party to the agreement, which is taking place in Cuba on Friday.


“The summit will be an opportunity to show the advantages of this model of integration, in contrast to what is offered in treaties proposed by the United States, although this does not mean that Caribbean countries should give up their relations with the US and Europe,” a Cuban analyst who requested anonymity told IPS.


Petrocaribe was founded in 2005 as an initiative of Venezuelan President Hugo Chávez, and currently its other members are Antigua and Barbuda, Bahamas, Belize, Cuba, Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Nicaragua, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines and Suriname.


Most of these countries will be represented by high level government officials at the one-day meeting to be held in the Cuban city of Cienfuegos, 232 kilometres southeast of Havana. The sessions will end with the reinauguration of an old refinery which has been modernised with Venezuelan capital.


The refinery will initially process 65,000 barrels of crude a day, doubling Cuba’s present refining capacity, and will act as a regional hub from which other Petrocaribe member countries will benefit. Later it will expand production to over 100,000 barrels a day.


Official sources confirmed that the Cuban delegation will be headed by acting President Raúl Castro, indicating the high priority placed by the host country on energy issues, and on its relations with the other Caribbean countries, with which it has natural geographical, historical and cultural affinities.


In addition to Chávez, Presidents Daniel Ortega of Nicaragua, René Préval of Haiti and Leonel Fernández of the Dominican Republic will be attending, as will Prime Ministers Bruce Golding of Jamaica, Baldwin Spencer of Antigua and Barbuda, and Ralph Gonsalves of St Vincent and the Grenadines.


Barbados and Trinidad and Tobago will be participating as guests; they have also been present at previous Petrocaribe meetings. Delegations from Guatemala and Honduras will be attending this meeting of the alliance, which they have been observing with interest, for the first time.


Representatives from the Caribbean Community (CARICOM), the Association of Caribbean States (ACS) and the Organisation of Eastern Caribbean States (OECS) have also confirmed that they will attend.


Petrocaribe is an energy cooperation initiative which, by its own account, aims to overcome asymmetries in access to energy resources among the countries of the Caribbean region by means of a new arrangement for favourable, equitable and fair exchange.


According to official Venezuelan sources, rather than just a contract to supply oil and gas to Caribbean nations, Petrocaribe is a political initiative for providing financing and structural facilities to ensure direct supply, without intermediaries, from Venezuela’s state oil company PDVSA to other state energy companies in the region.


Under Petrocaribe, Venezuela sells oil to these countries at market prices, but on preferential terms. The agreement provides soft financing for 40% of the cost, and if the international price rises above 40 dollars a barrel, as it has done long since, the period for upfront payment of 60% of the cost is extended from 30 to 90 days.


In addition, the grace period before payments of the financed portion begin is extended from one to two years, the period of payment is extended from 17 to 25 years, and a reduced interest rate of one% is charged.


Venezuela is also willing to accept part of the deferred payment in goods and services, for which it can offer special prices in some cases.


The financing scheme eases the impact of speculative oil prices, which are now above 90 dollars a barrel. The cost of supplying electricity to the people of St Kitts and Nevis, for example, will be cut by 5% in 2008 thanks to the Petrocaribe scheme.


The third summit, held in Venezuela in August, welded the agreements on supply of crude oil and derivatives into a solid energy security pact between Petrocaribe member countries. On that occasion, Chávez said that energy would become the key instrument for creating “the union that our Liberators dreamed of”.


Chávez also made a number of supplementary proposals, including “a network of refineries” in the Caribbean to process the heavy crude that Venezuela extracts from its southeastern Orinoco Belt, a trans-Caribbean gas pipeline, and regasification plants for liquefied natural gas.


He also proposed developing the petrochemical industry and alternative sources of energy, such as solar and wind energy and biofuels. He recommended, however, that in the case of biofuels efforts should be directed only at producing enough ethanol to make a 20% blend with gasoline, in order to make it “less polluting”. (IPS)