BLOOMBERG is highlighting how Venezuela’s State oil company is pushing to revive the flagging energy pact with the Caribbean under different terms as it seeks markets that are willing to pay cash for oil and refined products.

In a CMC report, St Vincent and the Grenadines Prime Minister Dr Ralph Gonsalves disclosed the type of agreements being sought, noting that Caracas has agreed to cancel St Vincent and the Grenadines’ debt under PetroCaribe.

Bloomberg said that overall, Petroleos de Venezuela SA (PDVSA) is lobbying island governments to negotiate terms for the new shipments under a revived PetroCaribe agreement, an arrangement abandoned four years ago as oil production fell and also as PetroCaribe members ran up debts for the shipments.

PetroCaribe was a multilateral agreement between Venezuela and 13 Caribbean countries which created the PetroCaribe Initiative. Subsequently, the membership was increased, bringing the total to 18 countries.

However, it fell victim to cooling US policy and increased sanctions, with Caribbean members only now calling for a revival as oil prices increase.

Gonsalves said last week that approximately 23,000 barrels of oil will arrive in the country by the end of October under Venezuela’s PetroCaribe agreement.

Gonsalves said in the CMC report that Venezuela would half the debt of the other member countries of the Organisation of Eastern Caribbean that are members of PetroCaribe, which will now be reset to offer fuel at 35 per cent discount to participating countries.

The Caribbean leader said there would also be “a revival of PetroCaribe, which has been brought to a screeching halt effectively by certain sanctions.”

Turnaround

The turnaround in regional attitudes to Venezuela has been occasioned by the Russia-Ukraine war which has led to spiralling oil prices.

Bloomberg noted how nations throughout the Caribbean “have been publicly calling on the US to ease sanctions on Venezuela, and allow it to resume its cheap-oil diplomacy at a time when the region is getting hit with soaring energy costs.”

The Jamaica Observer reached out to the Ministry of Finance and Planning (MOFP) in Jamaica and also to Petrojam to find out if the island had been approached by Petroleos de Venezuela SA with its offer of debt relief and subsidised oil for cash. However no response was received up to press time.

Meanwhile, Argus Media, which tracks oil production, said that output in Venezuela is still below par.

It noted that while the PDVSA report for September indicated many fields were not producing any oil, production from the Orinoco belt is expected to get a boost from new contracts with its neighbours.

Relationship

Jamaica’s relationship with Venezuela under the PetroCaribe Agreement was inked in 2005, with guaranteed supplies of petroleum products and repayment allowed over 23 years using goods and services.

Member countries were allowed to retain part of their payment in the form of a low interest loan.

Within the ambit of the agreement, Venezuela purchased 49 per cent of the shares in the Petrojam Refinery in 2008 and promised to underwrite its upgrade.

The current Jamaican Government, however, in response to increased US sanctions on the Venezuelan Government, expropriated Venezuela’s share of the refinery after passing legislation to take Venezuela/PDV-Caribe’s Petrojam shares in February 2019.

The payment for the holding was reportedly placed in escrow, as under US sanctions sending cash with/banking relationships with Venezuela is not permitted. The bill indicated that in assessing compensation for the shares, account would be taken of the fair market value of Petrojam as determined by the valuation that was conducted by Muse, Stancil and Company. No figures were provided. However, in 2007, under the Share Sale and Purchase Agreement Venezuela paid US$63.7 million for the 49 per cent shareholding.

Caribbean Business Report sought an update on funds held in escrow from the MOFP, but this was not forthcoming. On wednesday however, Cabinet Secretary Robert Morgan said he was unaware of any new agreement under Petrocaribe, stating, “I’m unaware of such engagement. No discussion has taken place in Cabinet as it relates to that.” He said also that Venezuela’s funds are still being held in an escrow account.

Any new agreement between Jamaica and Venezuela will have to negotiate this thorny history and Jamaica’s preference for following the mandates of the United States.

Local manufacturers have been protesting the impact of sustained, high, energy costs.

Crude oil is forecast to soar to $125 per barrel next year and $150 in 2023 due to OPEC’s limited capacity to boost production, JP Morgan analysts said in a new report this October.

The US, meanwhile, has indicated interest in diversifying energy sources since the Russia-Ukraine war. Even though it is constantly at odds with Venezuela, it was the South American country’s largest trade partner in the last decade.

In 2019, the US imposed a ban on the importation of Venezuela oil shortly after president Nicholas Maduro won re-election.

However the Biden Administration is reconsidering that decision in the wake of the US ban on the importation of Russian crude oil and some petroleum products in its sustained campaign against the Russian led war in the Ukraine.