US embassy cable - 04CARACAS2255

C O N F I D E N T I A L  CARACAS 002255 
 
SIPDIS 
 
 
NSC FOR TSHANNON AND CBARTON 
ENERGY FOR DPUMPHREY AND ALOCKWOOD 
 
E.O. 12958: DECL: 07/12/2014 
TAGS: ENRG, EPET, PREL, VE 
SUBJECT: PETROAMERICA:  CHAVEZ'S OIL DREAM FOR THE AMERICAS 
 
REF: CARACAS 1550 
 
Classified By: Economic Counselor Richard Sanders, for reasons 1.4 (b) 
and (d) 
 
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SUMMARY 
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1. (C) Energy Vice Minister Luis Vierma told Emboffs July 12 
that discussions with Caribbean nations on the formation of a 
"PetroCaribe" joint venture are at a preliminary stage. 
According to Vierma, the GOV's plans for the Hemisphere 
envision a holding company "PetroAmerica" that would have 
three subsidiaries, PetroCaribe, PetroSur, and PetroAndino. 
These companies would be involved primarily in the downstream 
functions of the oil industry, i.e. refining and 
commercialization.  Although Vierma made no reference to any 
political element to "PetroAmerica" or its would-be 
components, it is inescapable.  We believe Venezuela is 
aggressively pushing its plans for the integration of energy 
companies throughout the Hemisphere to gain political 
strength.  End summary. 
 
2. (U) On July 12, Econcouns, accompanied by Petroleum 
Attache, met with Vice Minister for Hydrocarbons Luis Vierma 
to discuss a wide range of issues.  His comments on 
Venezuelan production and upcoming projects are presented in 
septel. 
 
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PETROAMERICA:  AN OIL COMPANY FOR THE AMERICAS 
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3. (C) On July 12, Reuters reported that on July 10 the GOV 
had signed "a preliminary energy cooperation accord with 11 
Caribbean nations which aims to refine Venezuelan crude into 
cheaper products for the region."  According to the report, 
the signatories to the agreement were Guyana, Antigua and 
Barbuda, the Bahamas, Dominican, Jamaica, Trinidad and 
Tobago, St. Vincent and the Grenadines, St. Kitts and Nevis, 
Suriname, Grenada, Cuba and Venezuela.  Emboffs raised this 
story with Vice Minister for Hydrocarbons Luis Vierma, who 
explained that the GOV's discussions with the Caribbean 
nations are at a preliminary stage.  Vierma described the 
July 10 meeting as one in which the Caribbean representatives 
described the serious impact of high oil prices on their 
economies.  He characterized the July 10 document as a "joint 
communique" rather than an "accord," showing their intent to 
continue studying the concept.  If the talks are successful, 
Vierma said, the resulting joint venture, PetroCaribe, would 
be one of three subsidiaries of a holding company called 
PetroAmerica.  The other two would be PetroSur and 
PetroAndino. These companies would be involved in the 
downstream functions of the oil industry, i.e. refining and 
commercialization. 
 
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PETROCARIBE 
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4. (C) Turning first to PetroCaribe, Vierma, an engineer, 
drew a chart demonstrating the flow of products through the 
refinery process, to transportation, storage and 
commercialization.  In its initial phase, PetroCaribe would 
be a joint venture company that would harness the synergies 
in the refinery sector among Venezuela, Trinidad & Tobago, 
and Jamaica.  Venezuela would ship oil to Trinidad & Tobago's 
160,000 b/d refinery and Jamaica's 35,000 b/d refinery.  The 
joint venture would then handle the marketing of the refined 
products to the smaller islands in the Caribbean by a fleet 
of boats.  Each island would invest in storage tanks and 
service stations which would give it an equity stake in 
PetroCaribe.  Pointing to the Bahamasas an example, Vierma 
said its gasoline is now $4/gallon.  PetroCaribe, he said, 
might eventually be able to subsidize that cost, depending on 
PetroCaribe revenues and the equity share of the Bahamas in 
 
 
the joint venture. 
 
5. (C) When Emboffs asked if the intent is for PetroCaribe to 
take over the market share of private sector companies, 
Vierma responded that companies now in the Caribbean market, 
such as Shell, would be invited to participate.  For one 
thing, he noted, the would-be partners do not have the 
tankers needed to transport the refined products through the 
island chains.  Vierma added that the entire Caribbean, 
including Cuba and "even Puerto Rico," could participate. 
Energy Minister Ramirez subsequently announced to the 
Venezuelan press on July 14 that regional energy ministers 
will meet August 26-27 in Jamaica to work on creating 
PetroCaribe.  Ramirez is quoted in the press as having said 
that the venture seeks to cut out middlemen in the Caribbean. 
 
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PETROSUR 
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6. (C) "PetroSur," said Vierma, would encompass the deal, 
signed April 6, under which Venezuela sells fuel oil and 
diesel fuel to Argentina in exchange for Argentine food and 
manufacturered products (see reftel).  Vierma added that the 
GOA has also approached PDVSA to propose that PDVSA join it 
in evaluating certain Argentine exploration blocks. 
 
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PETROANDINO 
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7. (C) With respect to the eventual formation of a 
"PetroAndino," Vierma noted that Venezuela had signed a 
technical agreement with Boliva on May 13 and had also inked 
an agreement on LPG with Ecuador.  He characterized Peru as 
"cold" to the prospects of a joint venture, while  Venezuela 
and Colombia are still discussing the possibilities of a 
cross-border gas pipeline (this will reportedly be an issue 
in the July 14 meeting between Presidents Chavez and Uribe). 
This pipeline would be designed initially to carry Colombian 
gas to western Venezuela.  The flow would be reversed as 
Colombian stocks decline and what are expected to be robust 
Venezuelan stocks are brought on line. 
 
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COMMENT 
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8. (C) Although Vierma made no reference to any political 
element to "PetroAmerica" or its would-be components, it is 
inescapable.  In fact, Minister of Energy and Mines Rafael 
Ramirez was quoted in the July 12 Reuters report as saying 
with respect to PetroCaribe, "it is important to understand 
that this type of accord is not a commercial accord....but 
fundamentally ...is a political agreement."  Petro-diplomacy 
has a long tradition in Venezuela, although it has usually 
been used with the Caribbean and Central American countries 
which are signatories of the San Jose and Caracas Energy 
Accords.  Venezuela's efforts to push its plans for the 
integration of energy companies throughout the Hemisphere, 
however, is in line with President Chavez's desire to gain 
political strength and to play a larger role in the 
Hemisphere.  The development of broader export markets for 
Venezuela's oil would also be a logical step toward President 
Chavez's goal of shifting Venezuela's oil away from its 
current market -- the U.S. 
McFarland 
 
 
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      2004CARACA02255 - CONFIDENTIAL