US embassy cable - 04SANTODOMINGO6119

UNCLAS SANTO DOMINGO 006119 
 
SIPDIS 
 
DEPT FOR WHA/CAR, WHA/EPSC, EB/ESC; DEPT PASS DOE; TREASURY 
FOR DO:LCARTER 
 
E.O. 12958: N/A 
TAGS: EPET, EFIN, ENRG, DR 
SUBJECT: DOMINICAN - VENEZUELAN AGREEMENTS ON CONCESSIONAL 
PETROLEUM FINANCING AND DEVELOPMENT COOPERATION 
 
 
1.  During a November 6 stopover in Santo Domingo lasting 
less than twelve hours,  Venezuelan President Hugo Chavez 
signed with Dominican President Leonel Fernandez two 
agreements, the first providing favorable terms for Dominican 
purchase of Venezuelan petroleum products and the second 
encouraging greater cooperation in petroleum distribution and 
social affairs.  The politics and atmospherics of the visit 
will be reported septel. 
 
2.  The first agreement, referred to as the Caracas Energy 
Cooperation Agreement, provides concessional financing for 
the Dominican Republic to import 50,000 barrels of Venezuelan 
crude per day, with financing of between 5 and 25 percent of 
this amount for 15 years with one year's grace period at an 
annual interest rate of  2 percent .   The agreement 
specifies that the percentage of the 50,000 barrels to be 
financed be pegged to the world price for petroleum.   As 
long as oil remains at $25/barrel or above, the deal will 
provide financing of 25 percent of the amount contemplated in 
the agreement.  At full financing under the agreement, it is 
estimated to be worth $150 million to $200 million annually. 
 At the lower end of the scale, a world oil price of  $15 
dollars per barrel would allow the Dominicans to finance 5 
percent of the specified 50,000 barrels under the terms 
outlined in the agreement.  The  agreement will be subject to 
evaluation and adjustment according to Dominican purchases, 
the availability of Venezuelan product, and decisions by OPEC 
or any circumstance that obligates Venezuela to change the 
quota assigned under the agreement.  A similar agreement 
exists between Venezuela and Cuba and another is reportedly 
in the works with Paraguay. 
 
3.  The second agreement is referred to as the Integral 
Energy Cooperation Agreement.  It encourages the study, 
preparation and execution of joint projects for the 
exploration, extraction, production, transport, refining, 
storage, processing, distribution and commercialization of 
hydrocarbons.  It promotes training and development of human 
resources and the creation of mechanisms to exchange 
information, policies, legislation and  technology related to 
the petroleum sector. 
 
4.  During a press conference following the signing of the 
agreements, Presidents Chavez and Fernandez announced the 
creation of a "mixed commission" to advance sectors related 
to societal development in both countries.  It is to meet 
every six months.  The commission will include the Dominican 
Secretary of Industry and Commerce with the Secretary of 
 
SIPDIS 
Foreign Affairs, and the Venezuelan Ministry of Energy and 
Mining and the Foreign Minister. Press reports say that the 
mixed commission's goal will be to invent or seek out 
creative ways to "advance development" in Venezuela and in 
the Dominican Republic. 
HERTELL