Petrotrin caught in PetroCaribe’s cross hairs

The deal which will make crude from Venezuela cheaper for Caribbean countries will erode the main export markets of Petrotrin, despite the rhetoric coming from some quarters that this country is free to export their oil products to their markets.

Nine Caribbean countries, the Dominican Republic, Antigua, Suriname, St Kitts and Nevis, Grenada, Guyana, Belize, Dominica and St Vincent and Grenadines have signed the agreement.

Barbados has ref-used to sign the deal, saying it will incur too much debt. Energy Minister Anthony Wood said joining Venezuela’s PetroCaribe did not make sense since Barbados already got discounted rates from TT. Wood said Petro Carib’s financing terms would add $US68 million to the country’s annual debt under current world oil prices of around US$70.

"The debt implication," he said, "of the PetroCaribe agreement runs counter to the government’s debt management strategy," he said.

Jamaica and Cuba had previously signed the deal. Under the terms of the PetroCaribe agreement, Caribbean country members will purchase 185,000 barrels Per day of crude from Venez-uela.

Caribbean governments will pay market price for Venezuelan oil, but they would only be required to pay a portion of the cost up front and could finance the rest over 25 years at one-percent interest.

Governments could also pay for part of the cost with services or goods such as rice, bananas or sugar while oil-rich Venez-uela would provide assistance in expanding shipping and refining facilities.

Days before the gathering of Carib-bean leaders in Jamaica, Energy Minister Eric Williams said his government continues to be concerned about the ability of State-owned Petrotrin to export to their long-standing markets in the Caribbean when the deal kicks in.

"It’s questionable as to what will become of Petrotrin, our own refinery and marketing arrangements within the region, how it will fit together and that is a major concern to us," said Williams who did not attend the Caribbean Energy Ministers meeting, preceding the leaders’ Summit.

Trinidad and Toba-go, the lone oil and gas producing country in Caricom supplies over 14 million barrels of oil annually to their Caribbean markets. Jamaica is Trinidad’s largest Caricom importer with an estimated ten million barrels a year.

Although Caribbean countries have been putting pressure on this country for a reduction in the price of crude, Williams explained that Trinidad could not offer a discount since his country imports between 80,000 — 100,000 barrels of oil per day to supplement the local supply and then re-sold to the export markets.

"We have to sell at whatever the going rates are," he added.

Caribbean countries, whose eco-nomies already burdened by continuing weakness in their traditional banana and sugar industries and facing huge oil bills because of unprecedented hikes in the price of crude initially approved the Petro-Caribe initiative during a meeting with Venezuela’s President Hugo Chavez last June in Puerto La Cruz. Prime minister Patrick Manning did not sign the PetroCaribe initiative then and neither did he attend last week’s summit of leaders.

"Even when Venez-uelan oil will be sold at a price only slightly below market value, the generous financing terms will allow many islands in the Caribbean to breathe freely thanks to Venezuela’s gesture," said Jamaica’s prime minister PJ Patterson at the summit.

He also said the accords came "without any political strings" perhaps in response to critics of Chavez who say it will allow the socialist leader to expand his influence in the region, much to the dismay of Washing-ton. Patterson lamented that a combination of factors such as devastating weather systems, have driven oil prices to an unprecedented level, contributing to the cost breaking US$70 per barrel mark.

"Security of supplies and stability in price are issues of great concern, especially for small non-oil producing states such as those in the Carib-bean," he stated.

Jamaica’s Com-merce, Science and Technology Minister Phillip Paulwell who also oversees the energy sector said the achievements made at the Energy Ministers Meeting and at the Summit would assist the Caribbean "on the long road toward energy cooperation and integration for socio-economic development."

"In fact, this is where the real hard work begins, as we move to take advantage of the many developmental opportunities available under this agreement," he said at the closing ceremony.

There was also further work to be done "in areas of joint oil exploration and production, transportation, renewables, gas and in refining."

In outlining the benefits of the Petrocaribe agreement to Jamaica, Patterson told the Parliament recently that over the past ten years, the island’s energy intensity — the ratio of energy consumption to GDP — has been increasing at a rate that is economically challenging.

Using 1987 as a base year, he said GDP grew by 20 percent, while energy consumption increased by 112 percent. The cost of imported petroleum in 2004 amounted to just under US$800 million, nearly doubling the US$420 million in 2001. In 2004 over 60 percent of Jamaica’s export earnings was spent on the importation of petroleum products.

The average price of a barrel of crude in 2004 was US$34.4 compared to the recent wild fluctuations in excess of US$61 per barrel. Collectively, well over 60 percent of Jam-aica’s petroleum imports are used by the electricity generation, mining and manufacturing sectors. In 2004 about 8.3 million barrels of oil were consumed by the bauxite/alumina sector, 6.5 million barrels by electric power generation and 5.4 million barrels by the transport sector.

Regarding Trinidad and Tobago, Patterson said the PetroCaribe initiative does not restrict Trinidad from selling its petroleum products in the Jamaican market.

He also did not see any implications for the proposed Jam-aica/Trinidad LNG Project. Both countries last November signed a Memoran-dum of Understanding on a proposed Jamaica Liquefied Natural Gas Project. The MOU also provides for the supply of 1.1 million tonnes of LNG per annum by Trinidad to Jamaica at agreed prices for 20 years.

With regard to the Energy Fund established for Caricom members by Trinidad and Tobago, Patter-son said he regards Petrocaribe as a complement to the Fund.

"It reflects a commonality of purpose by the region’s two energy rich countries that is cooperation and integration for the social and economic development of the peoples of the region."