Basseterre, St. Kitts and Nevis.-PETROCARIBE is created as an initiative of the Government of the Bolivarian Republic of Venezuela in order to contribute to promoting and strengthening the integration of the peoples of our America and within the context of the sudden increase of oil prices in 2005 due, to a great extent, by speculation.
Unlike other international initiatives promoted by capitalist countries and large corporations, PETROCARIBE has demonstrated its commitment to promote specific actions aimed at developing countries having access to energy and a fair price of this resource, setting out therefore a scheme for the fair exchange of crudes and oil products under flexible payment conditions.
Since its inception in the city of Puerto la Cruz, Anzoátegui state, to date, five summits and four ministerial councils have been held and they have established the political orientation and main guidelines to develop cooperation projects in the region.
With the incorporation of Nicaragua, Haiti, Honduras and Guatemala, PETROCARIBE expands its field of action to 18 countries in Central America, South America and the Caribbean, which represents a conglomerate of over 88 million inhabitants, on a surface (islands and continent) of 1,879,210 km2 and an average regional Gross Domestic Product of 6.17 %.
The political will of the countries making up PETROCARIBE has lead to this integration scheme being today a consolidated regional energy platform, thereby contributing to decreasing existing asymmetries and using the available resources and potentialities of the region with a view to guarantee energy security and fair trade.
Tactical and operational matters
During its 4 years of existence, PETROCARIBE has developed important energy projects, which represent a significant impact on the boost given to the socio-economic development of our peoples and have materialized integration and strengthened the capabilities of member countries of the organization to take balanced care of the demand inherent to growth.
The achievements associated with projects in the fields of refining, electric power generation and infrastructure amount to an investment of US$24.56 billion and the generation of 59,647 direct and indirect jobs through the incorporation of eleven joint venture companies in which Venezuela and eight member nations participate.
During the 2007 and 2009 period, 14 countries of the 18 PETROCARIBE members have activated the crude and oil product supply mechanism and reported an increase of the volumes shipped from 59 thousand barrels daily to 121 thousand barrels daily, equal to a 105% increase in the mentioned period.
The continuous strengthening of the supply and logistics strategies aimed at lowering transactions costs and decreasing the cost of the energy bill has favoured the sound concretion of this integration mechanism.
Taking into consideration the cumulative actual supply and the generated economic impact, it may be seen that the total bill for hydrocarbon supply has reached US$6.9 billion, from which US$1.4 billion represents tangible savings, whilst US$2.9 billion corresponds to the long-term financed amount. These figures are supported by an exchange of around US$90.5 million barrels in the mentioned period.
Actual supply is not exclusively limited to fuel (gas, gasoline, diesel, jet, among others); it also includes investments in infrastructure projects that will facilitate the development of fuel distribution systems in various PETROCARIBE member countries, such as Dominica, St. Vincent and the Grenadines, Grenada, St. Kitts and Nevis and Nicaragua, reaching a potential distribution capacity of 727 thousand barrels.
Regarding storage, an additional 5 thousand barrel fuel storage tank is being built in the electric plant of St. Kitts and Nevis to increase the electric power generation capacity of this country. Moreover, as part of a strategy for the expansion of fuel systems, it should be highlighted the LPG bottle filling plants project in St. Vincent and the Grenadines (with a capacity of 20 thousand gas bottles per month). These initiatives have generated approximately 374 direct and 800 indirect jobs, thereby contributing in a decisive manner to the socio-economic development of the countries and peoples where such infrastructure is located.
In the field of electric power, the scope of PETROCARIBE Energy Security Treaty includes the expansion of the power distribution network through the construction, financing and expansion of power generation plants in Nicaragua, Haiti, St. Kitts and Nevis, and St. Vincent and the Grenadines. These projects will reach a capacity of 320 MW and cover between 17% and 40% of the total electrical power demand in the countries involved, and will generate 434 direct and 482 indirect jobs.
Furthermore, in order to ensure the Caribbean a Refining Circuit that maximizes coordination economies and impacts the fixing of prices in oil by-products markets in the Atlantic basin, eight refining projects have been conceived and will be located in Cuba, Nicaragua, Haiti, Jamaica and Dominica. The purpose of these projects is to reach a manufacturing capacity of around 580 thousand barrels per day, with an investment of about US$24 billion. The implementation of these projects will generate 17,844 direct and 39,713 indirect jobs.
PETROCARIBE goes beyond merely energy and has expanded its field of action to a priority area – social development. Through the Alba Caribe Fund and the trust funds for management of the long-term financed energy bill, 48 social projects are being developed in 11 member countries. These projects represent an investment of US$222 million ranging from housing construction programs to health, road building, public safety and education programs, among others. Social projects developed within PETROCARIBE framework benefit a population of over 4 million people.
Strategic matters
With a view to analyzing the features and technical and financial aspects related to the cooperation areas included in the Energy Security Treaty, the Ministers attending the 3rd Ministerial Council in Cienfuegos decided the setting up of seven Technical Teams.
Verification and Audit Mechanism (supplied volumes) ALBA Caribe Fund: This mechanism is aimed at checking and auditing the real destination of the supplied volumes, as well as the allocation and use of the resources coming from the ALBA Caribe Fund. In this regard:
A mechanism was established to audit the volume reception and storage processes, the PETROCARIBE General Auditor was appointed, and the pilot project was implemented in Cuba, Nicaragua, the Dominican Republic and Jamaica, with favourable results. This has implied an investment of 1,240 man-hours for this team to be able to attain its goal.
Gas Supply Master Plan to PETROCARIBE Member Countries: This plan calls for structuring a strategic plan to supply gas to member countries, taking advantage of the existing synergies and considering all transportation possibilities required to meet member countries’ requirements, diversify their primary energy matrix, and support the development of the potential petrochemical poles in the region. For its development, the master plan includes 26,640 man-hours of contracted personnel and 8,600 man-hours of own personnel to meet the objective of this team.
Energy saving and efficient use: With regard to the 2008-2009 management, the following projects were developed:
a) A replacement program of incandescent light bulbs with compact fluorescent light bulbs in the Republic of Honduras.
b) A preliminary study of the potentialities for the installation of hydroelectric power micro plants that allow this energy source to be effectively incorporated into the primary energy matrix of member countries. An investment of 764 man-hours was made for the development of the project visualization engineering.
Renewable energy sources Project / Alternative Energy Source Financing Fund: This fund calls for identifying viable projects for the development of renewable energy sources. In this regard, renewable energy projects have been identified, which will be developed with Portugal’s EDP in the field of prospection and characterization of wind energy potential in PETROCARIBE member countries. Venezuela and Dominica have been entrusted with the development of these projects. 1,042 man-hours have been invested to date to fulfill the objective of this team.
Communication Plan: This plan is aimed at disseminating the tangible benefits and achievements of PETROCARIBE in its member countries, with a view to strengthening the image of this regional integration mechanism vis-ŕ-vis the public. The PETROCARIBE General Communication Plan for 2009 was prepared. This plan includes the Graphic Identity Manual, the Agenda for Regional Energy Events and the PETROCARIBE Webpage, among others.
Building and Training of Technical and Professional Cadres in Energy Matters: This program purpose is taking advantage of the existing experience in the different technical and professional areas among member countries in order to coordinate the building and training of the workforce.
A catalogue of courses for 2009 was approved and a workshop was held on the Induction into the Detection of Training Needs (DNF, for its Spanish acronym) and Training Management and Administration System (SIGAFOR, for its Spanish acronym).
Petrochemical Industry: This team is responsible for characterizing refining currents in the Caribbean region, which have petrochemical industry development potential.
Petrochemical potentialities of the Camilo Cienfuegos refinery in Cuba and the Supremo Sueńo de Bolívar refinery in Nicaragua will be evaluated.
A total of 154.25 million metric tons of urea was supplied to Cuba, Honduras, Nicaragua, Dominica, Jamaica and the Dominican Republic in 2008-09. This activity implied deployment 120 man-hours.
Planning and Fair Trade Committee: The aim of this Committee is conceiving a fair trade and planning mechanism for member countries. To this end, a conceptual document was prepared and distributed that will allow a framework to be established to formulate the mechanism and apply compensation as a way to repay financing.
Petrocaribe in the framework of the global financial crisis
It is undisputable that PETROCARIBE has been a successful mechanism. It suffices to see the achievements it has made in only 4 years: reduction of costs associated to the member countries oil bill; implementation of projects that have reduced energy transaction costs; contribution to the member countries’ endogenous development in the framework of a world energy environment of volatile oil prices, where the oil barrel price has fluctuated from US$140 to US$32 in a scenario of a severe crisis of the financial capitalist system, which has put increased pressure on countries thereby reducing their capability to allocate resources to the payment of their energy bill.
Consequently, this is one of the most important subjects derived from this meeting where a novel financing mechanism has been conceived that will allow refinancing commitments derived from the different agreements, through the ALBA Bank, and alleviate the financial burden of member countries. This is also a significant step toward the construction of a financial architecture different to that imposed by the Washington Consensus.