News: Petrocaribe deal slow to take effect

(AP 04/07/2007) San Juan - One year after 13 Caribbean countries signed a deal with Venezuelan President Hugo Chavez to buy oil under preferential terms, a majority of them have not received a single drop of fuel, while those that have are still paying high prices at the pump.

Cash-strapped Caribbean countries have welcomed the pact known as Petrocaribe as a way to counter soaring oil prices. But eight nations say they haven't gotten fuel shipments yet, largely because they're figuring out how to handle them.

The program has gotten bogged down because many governments don't have state-owned docking or storage facilities, or the know-how of running an oil business - a task they previously left to private companies.

While Chavez's critics say he is using "oil diplomacy" to build anti-U.S. political alliances, many Caribbean leaders say they believe the program will be genuinely helpful and are determined to take advantage of it.

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"We're charting uncharted waters here. It has to be done right," said Earl Bousquet, a St. Lucia government spokesman. "You don't want to go into an agreement and then you have the Venezuelans knocking on your door saying, 'Well listen, we have all this oil, where are you going to put it? And, how are you going to get it from Antigua to St. Vincent?'"

Under the Petrocaribe plan signed last June 29, countries pay market price for Venezuelan fuel but are only required to hand over part of the cost and can finance the rest over 25 years at low interest. Governments can also pay partly with services or goods, such as rice and bananas, while Venezuela helps provide storage tanks and docking facilities.

The deal is widely seen as a bid by Chavez - long at odds with the U.S. - to make inroads in the Caribbean, where the U.S. is a major trading partner. Chavez calls his pact an alternative to U.S.-backed free trade deals, and he has sought new oil markets worldwide to reduce reliance on the U.S., which remains his biggest customer.

Some nations are still negotiating specific supply deals, while the Petrocaribe pact has continued to grow, with Haiti recently signing on as the 14th recipient.

"It looks like a very real attempt to find a regional solution to the problem of energy," said Anthony Bryan, a specialist in Caribbean energy cooperation at the Center for Strategic and International Studies in Washington. But he added, "a great deal is going to depend on the capacity of Caracas to deliver the program effectively."

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Six countries say they have begun receiving fuel from crude to diesel, while Venezuela has also shipped asphalt to Dominica.

Some leaders say they plan to use eventual savings for social programs, and have warned their people not to expect cheaper gasoline as pump prices have soared on the back of a surging world market.

"The gas price is tough! You cannot make money with these prices," said Steven Taylor, a bus driver in Jamaica.

Jamaican Foreign Minister Anthony Hylton said the deal has allowed the island to assure "a decent price given what is happening on the oil market."

Venezuela, which signed a second round of more specific deals with nine countries last September, has pledged to sell up to 190,000 barrels a day to nations from Suriname to St. Lucia.

Venezuela doesn't have a problem meeting the region's needs since the volumes are relatively small, said Asdrubal Chavez, a cousin of the president who heads PDV Marina, the shipping arm of state-run Petroleos de Venezuela SA, or PDVSA.

He denied delays were due to Venezuela overextending itself or that private companies were causing problems by having a stranglehold on distribution.

"Basically, it's been storage. The countries don't have storage. And they don't have a culture of managing, administrating fuel," Chavez said. "That has always been left to the transnational companies."

Analyst Patrick Esteruelas, of the Eurasia Group, said PDVSA is increasingly being used as a political tool "to buy diplomatic support abroad." Venezuela is seeking a seat on the U.N. Security Council over U.S. opposition and could use the Caribbean's support.

Esteruelas said Petrocaribe's slow start seems due to "run-of-the-mill logistical delays," but also "Venezuela's over-stretched production and delivery capabilities."

Venezuela, the world's No. 5 oil exporter, disputes claims that its production is sagging and says it has plenty of output.

Cuba buys about 90,000 barrels of crude a day under an earlier deal that has been folded into Petrocaribe, while Fidel Castro's government has sent thousands of volunteer doctors to Venezuela.

It could take three to four years for all countries to be online due to the infrastructure problems, said Gilles Deal, an analyst in the Bahamas' Energy Ministry.

The task of storing and distributing fuel in the region has previously been managed by transnationals and other private companies, which own a network of small storage facilities and port terminals. In some cases, such as in Belize and Antigua, authorities have worked out deals with private companies to use their storage tanks.

Cuba, Jamaica and the Dominican Republic have refineries, but some countries don't have their own terminals for unloading oil.

Some also lack state-owned storage tanks - a dilemma that led to one Cuban tanker sitting off Belize's coast for nearly a week last fall with 14,000 barrels of Venezuelan diesel until Belize worked out a deal with Esso, an Exxon Mobil Corp. subsidiary that controls the storage tanks.

In Grenada, Energy Minister Gregory Bowen said the island has a shortage of storage tanks and is hoping the private companies Texaco and Sol will help, though issues remain to be worked out.

Dominica received a storage tank from Venezuela last November, but it has sat in pieces on a dock while officials searched for a proper location - which they say they have found.

Eastern Caribbean countries hope to see shipments as soon as September now that Antigua has been chosen as a storage site, using a facility owned by the West Indies Oil Company.

Many countries are still buying oil from elsewhere, including the Caribbean nation of Trinidad and Tobago, whose prime minister has resisted Petrocaribe and traded barbs with other leaders over the deal.