Trinidad plans financing to help Caribbean cushion oil shocks
-regional petrol company under discussion
Stabroek News
July 15, 2004
Trinidad and Tobago (T&T) has announced it will offer long-term financing on regional fuel sales as part of a move to protect countries such as Guyana from price shocks.
This could mean Guyanese motorists are not hit as hard by large price leaps as happened earlier this year when prices reached $620 and overper gallon for gasoline. However, it remains to be seen whether Guyana's external debt commitments will preclude it from such a financing programme and whether this new initiative will proceed. Trinidad in the past has promised similar concessionary petrol arrangements for the region but these had never taken off.
T&T is also among countries in the region working with Venezuela to start a new petrol company that promises cheaper prices and secure supplies for the region.
On Tuesday, T&T's Minister of Trade and Industry, Ken Valley, said his country was planning to fix a US$30 a barrel ceiling on the price to Caribbean neighbours and to convert any figure over that amount into a long-term loan at low-interest rates, the Barbados Nation reported.
Valley announced the plan in New York while addressing Trinidad and United States business executives about investment prospects for the twin-island republic.
He revealed that the initiative is being pursued in conjunction with Venezuela, where the energy ministers from 13 Caribbean countries, including Guyana's Prime Minister, Samuel Hinds, met last weekend.
They agreed that steps would be taken to form PetroCaribe, a new company that would distribute crude and refined oil products at cheaper prices than other dealers in the region, a BBC report said.
The proposal for the new company has come from Venezuela, whose Mines and Energy Minister Rafael Ramirez said political terms were agreed upon that would form the basis for later commercial ones.
"The important thing is that the political terms must first be laid down before our companies can proceed commercially," he was quoted by the Oil and Gas Online Journal (OGJ) as saying.
Venezuela already has an arrangement with Caribbean countries to finance oil bills. Under the Caracas Energy Accord countries pay for 75 per cent of Venezuelan oil at market prices and they can finance the rest at 2 per cent interest over 15 years. It provides also for 25 per cent credit when prices are above US$30 per barrel.
But Ramirez said the dealers that distribute the fuel in the area sell at unfair prices. He said PetroCaribe would put checks in place to monitor the price at which Venezuelan products are sold.
Several weeks ago, when oil prices reached record highs, countries from the Organisation of Eastern Caribbean States (OECS) set up a task force to explore making joint oil purchases in order to save money.
Guyana had been negotiating for adjustments to the financing terms under the Caracas Energy Accord because they were incompatible with the country's Highly Indebted Poor Countries (HIPC) commitments. Local officials could not be reached for comment yesterday, but one informed source noted the tremendous impact the T&T deal would have on the local economy.
He said Guyana would no longer be susceptible to fluctuations in world market prices, which usually translate into significant foreign exchange expenditure for the country.
But T&T has not detailed the terms of the loan agreement, which may also be incompatible with Guyana's HIPC commitments.
Valley also noted T&T's long-term intention was to build a natural gas pipeline through the islands, going as far as Guadeloupe.
He also denied charges made in Barbados, Jamaica and elsewhere that T&T is selling oil to its Caribbean neighbours at a higher price than its exports to the US.
Valley rejected too, a suggestion by Jamaica that it had a right to national treatment on oil under Caricom's Single Market and Economy arrangement.
"Trinidad and Tobago resisted that argument conceptually two years ago but we weren't in disagreement with the principle of providing energy at a favourable price to Caricom countries," Valley said.
"But we were in disagreement that you can claim national treatment for our oil and gas. What we were saying is that the concept of the CSME is that gas in Trinidad and Tobago belongs to all of us..." he said.
"We will give them a price better than... the United States gets. But to say that you have a legitimate claim to get the same price as (Trinidad and Tobago Electricity), we say that's going too far. Trinidad's position is that it may very well be a case for the Caribbean Court of Justice. My hope is that we would come to some amicable arrangement."
Crude oil to be delivered in September ended yesterday at US$41.15 a barrel on the New York Mercantile Exchange, near a five-week high. Prices were 33 per cent higher than a year ago but down from a record high of US$42.45 a barrel on June 2.
The Nation reported that economists and Caricom Finance Ministers warn that oil prices could dampen the pace of economic growth.
Analysts at Standard & Poor's, the major Wall Street credit-rating firm, have also raised questions about Caricom's economic prospects this year, citing the high energy prices and warning they could serve as a drag on the economies of the region.
OGJ reported that as part of the PetroCaribe agreement, Venezuela and the islands will explore the possibility of Caribbean states buying oil directly from Venezuela on a government-to-government basis and then refining it in T&T. The oil will be owned by the governments and not the large oil companies such as Shell and Texaco, which supply crude in the region.
T&T's Energy Minister Eric Williams said while there was a long way to go there was a commitment to making energy prices in the region cheaper.
He said another part of the PetroCaribe initiative involved his country's state-owned Petrotrin forming partnerships with PDVSA in exploring the Plataforma Deltana area.
On his last visit to Trinidad, Venezuelan President Hugo Chavez had invited Petrotrin to take a share in the gas rich Plataforma Deltana area and there have been discussions between the two countries.
"We are making significant progress, Venezuela is working with the Caribbean as partners and we are hopeful that something meaningful will result from this venture," Williams said.
OECS countries Antigua/Barbuda, Dominica, Grenada, St Kitts/Nevis, St Lucia and St Vincent and the Grenadines were represented at the talks in Caracas which also included the Bahamas, Barbados, Belize, Guyana, Jamaica, Suriname and Trinidad and Tobago. The countries are slated to meet August 26-27 in Jamaica.