CEIS Petroleum Update December 2011
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Transcript of CEIS Petroleum Update December 2011
continued on page 2/
Caribbean Energy Information System (CEIS)
December 2011
s ince the birth of the Petro-
caribe agreement in 2005
many people have been trying
to ascertain if the advantages
of Petrocaribe have outweighed the
disadvantages. In this issue of the pub-
lication we will attempt to explain the
agreement, highlight what has been
achieved by Caribbean nations through
this agreement and also take a look at
the possible implications of the 25
years loan agreement.
About Petrocaribe
Petrocaribe started as
an Energy Cooperation
Agreement signed by
14 countries (Antigua and
Barbuda, Bahamas, Be-
lize, Cuba, Dominica,
Guyana, Haiti, Jamaica,
Nicaragua, Dominican
Republic, Guatemala,
St. Kitts, St. Lucia and
Suriname) that were al-
ready “concerned about
global economy trends
and, particularly, about
policies and practices pre-
vailing in industrialized
countries that could lead
to more exclusion of the
Third World smaller
countries with economies
that are more dependent
on international developments.” Cur-
rently there are 18 countries that are
part of the Agreement.
Deferred Financing Mechanism
(DFM)
The most crucial or important compo-
nent of the agreement is an innovative
financing arrangement DFM whereby
a percentage of the value of
each invoice for petroleum
products purchased from
Venezuela is made available to the
purchasing Government/Country as a
long-term concessionary loan payable
over a period of up to 25 years. The
interest rate, period of the loan and
amount financed is linked to the price
of oil in the international marketplace.
If the price of oil exceeds US$40/BBL
between 30% and 70% of the invoiced
amount is financed and this loan at-
tracts a 1% interest rate per annum,
repayable over 25 years inclusive of a
2 years moratorium period. If the price
of oil falls below US$40/BBL between
5% and 25% of each invoice is
financed over 17 years (inclusive of 2
years moratorium) at a 2% interest rate
per annum. This is considered a “win-
win” for many Caribbean countries
that have signed on to the Agreement
as there is guaranteed supply for the
countries life blood (petroleum) and
access to attractive financing or repay-
ment arrangements that are not avail-
able anywhere else. Table 1 (see over-
leaf) indicates the quotas available to
each CEIS member country that signed
the Agreement and Table 2 below
provides an idea of how payments are
calculated using the Deferred Financ-
ing Mechanism.
CARIBBEAN PETROLEUM UPDATE is a monthly Bulletin which highlights petroleum issues affecting or relevant to the
Caribbean, international developments that may affect the region’s way of life and movements in oil prices and retail prices for fuel regionally.
To access CEIS website
CONTACT US
Caribbean Energy Information System
Scientific Research Council
Hope Gardens, Kingston 6, Jamaica
1-876-927-1779 (Telephone)
1-876-977-1840 (Fax)
www.ceis-caribenergy.org
Source: www.petroleumworld.com Source: www.petroleumworld.com Source: www.petroleumworld.com
page 2 Call: 1-876-927-1779 | Caribbean Petroleum Update : December 2011
C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )
Petrocaribe Agreement the Caribbean’s Oil
Knight in Shining Armor? continued from page 1/
Benefits of Petrocaribe
Petrocaribe is more than a mere supply agreement that offers
payment facilities for signatory countries. It provides the
opportunity for member countries to develop the country’s
infrastructure through various projects and social
programmes. For the purpose of implementing the operating
guidelines of Petrocaribe, PDVSA created a special purposes
subsidiary for Caribbean and Latin American Countries,
“PDV Caribe S.A.,” with the main objectives being provi-
sion of support for joint planning, organization, and develop-
ment of capabilities to transport, receive, store, distribute,
and commercialize hydrocarbons through a direct, secure,
and reliable means of supply for the purpose of promoting
sustainable development.
PDV Caribe also coordinates and promotes development of
infrastructure projects aimed at improving the collective well
being and the quality of life for people. In order to facilitate
the successful implementation of these projects Mixed Com-
panies are created to carry out the Petrocaribe Agreement in
several member countries. These companies assist with the
provision of technical training and technological cooperation
with activities related to the conservation of electrical en-
ergy, the use of alternative energy sources and more rational
and efficient use of conventional and renewable energy
sources. Financial support for many of the social projects
implemented under the agreement is provided through the
Alba Caribe Fund which is constituted by resources coming
Price Range per Barrel of Oil US$>>> 15 - 19 20 - 21 22 - 23 24 -29 30 - 39 40 - 49 50 - 79 80 - 99 100 - 149 150>
% of Cash Paid to Venezuela for Oil 95 90 85 80 75 70 60 50 40 30
% of Cash Paid to Government as a Loan 5 10 15 20 25 30 40 50 60 70
% Interest Rate Applied to Loan Amount 2 2 2 2 2 1 1 1 1 1
Loan Repayment Moratorium Period (Years) 2 2 2 2 2 2 2 2 2 2
Period of Loan Repayment (Years) 15 15 15 15 15 23 23 23 23 23
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Assumed price per Barrel of Oil>>> 19 21 23 29 39 49 79 99 149 150
Upfront Payment to Venezuela for 1KBD 18,050 18,900 19,550 23,200 29,250 34,300 47,400 49,500 59,600 45,000
Loaned provided to Government on 1KBD 950 2,100 3,450 5,800 9,750 14,700 31,600 49,500 89,400 105,000
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Sample Invoice Date: December 15, 2011(Principal Loaned) 950 2,100 3,450 5,800 9,750 14,700 31,600 49,500 89,400 105,000
Yr 1 Principal + Interest (Moratorium Period 2012) -Compounded 969 2,142 3,519 5,916 9,945 14,847 31,916 49,995 90,294 106,050
Yr 2 Principal + Interest (Moratorium period 2013) - Compounded 988 2,185 3,589 6,034 10,144 14,995 32,235 50,495 91,197 107,111
Principal and Interest Due December 15, 2014 988 2,185 3,589 6,034 10,144 14,995 32,235 50,495 91,197 107,111
Amount Paid Annually to Venezuela (US$) (76.9) (170.0) (279.3) (469.6) (789.5) (733.1) (1575.8) (2468.5) (4458.2) (5236.2)
Total Amount Due over Life of Loan - Principal + Interest (US$) (1153.8) (2550.5) (4190.2) (7044.4) (11841.8) (16860.5) (36244.4) (56775.2) (102539.5) (120432.3)
Total Interest Accrued over Life of Loan (US$) (203.8) (450.5) (740.2) (1244.4) (2091.8) (2160.5) (4644.4) (7275.2) (13139.5) (15432.3)
Total Interest Expressed as % of Loan at the end LoanTenor 21.5 21.5 21.5 21.5 21.5 14.7 14.7 14.7 14.7 14.7
Table 1: Example of Petrocaribe Deferred Financing Mechanism using 1000 Barrels Per Day and
prices as per Rate Schedule as outlined in Agreement.
Table 1: Example of Petrocaribe Deferred Financing Mechanism using 1000 Barrels Per Day and
prices as per Rate Schedule as outlined in Agreement.
Note: Interest calculated for the 2 years moratorium period is capitalized/compounded. Note: Interest calculated for the 2 years moratorium period is capitalized/compounded.
continued on page 3/
Table 2
10KBDSuriname9
1.2KBDSt Kitts8
23.5KBDJamaica7
5.2KBDGuyana6
50KBDDominican Republic5
1KBDDominica4
92.3KBDCuba3
4KBDBelize2
4.4KBDAntigua and Barbuda1
Supply quota (2011)Country
10KBDSuriname9
1.2KBDSt Kitts8
23.5KBDJamaica7
5.2KBDGuyana6
50KBDDominican Republic5
1KBDDominica4
92.3KBDCuba3
4KBDBelize2
4.4KBDAntigua and Barbuda1
Supply quota (2011)Country
Note: Barbados, Trinidad & Tobago, the Bahamas and St.
Lucia have not signed the Bi-lateral Petrocaribe Agreement.
Table 1: Quotas Allowed for Oil Imports under Petrocaribe.
Caribbean Petroleum Update : December 2011 | Call: 1-876-927-1779 page 3
C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )
continued on page 4/
from the savings generated by the fi-
nancing of the oil bill and direct trade,
as well as coming from financial and
non-financial instruments. Nine coun-
tries have benefited from this fund:
Antigua and Barbuda, Belize, Cuba,
Dominica, Grenada, Haiti, St. Kitts
and Nevis, Saint Vincent and the
Grenadines, and Nicaragua.
Interviews and surveys with represen-
tatives from countries that have util-
ized the Petrocaribe Agreement re-
vealed that since signing, the agree-
ment has been of great benefit more so
particularly at the time when oil prices
sky rocketed in 2008. Many high-
lighted the fact that having the differed
financing arrangement in place cush-
ioned the impact on their economies.
Had these countries been required to
find the full amount
of the invoice to
pay upfront for
fuels the impact
would have been
too severe for some. In addition sev-
eral social programmes have been real-
ized and the lives of many have been
improved as a result. It is important to
note also that the Governments bene-
fiting from financing under the Agree-
ment has full autonomy to utilize the
funds as they see fit locally.
In the case of Antigua and Barbuda for
example, 14 projects have been real-
ized on the National level, two of
which are regarded as flagship pro-
jects: People’s Benefit Programme
(since March 2009 providing EC$215/
mth to approximately 1600 poor or
economically dis-
advantage or dis-
abled persons to
purchase grocer-
ies, etc.) and Util-
ity Subsidy Pro-
gramme (since
2008 providing
EC$100/mth to
4,520 pensioners
to assist with off-
setting the cost of
Utilities). Other
programs of men-
tion in Antigua
includes support to
the Gilbert’s Agri-
culture Research
Centre to allow
single mothers and
young people to
learn skills in solar
drying so that they could establish
Small and Micro Enterprises (SMEs),
Hurricane Omar (2008) Relief Pro-
gramme, Development of water stor-
age desalination plant, etc. Plans are
currently on the ground to focus atten-
tion on utilizing some of the funds un-
der the Petrocaribe Agreement to es-
tablish large scale Renewable Energy
projects for Antigua in 2012.
Jamaica, another of the beneficiaries
under the agreement, boast the 18 MW
expansion of the Wigton Windfarm,
expansion and modernization of the
Norman Manley International Airport
(NMIA), expansion of the Port Au-
thority of Jamaica Kingston Container
Terminal, Petro-jam Refinery upgrade
(expand processing capacity from
35KBD to 50KBD), support to Air
Jamaica to assist with operations dur-
ing high fuel prices, support to Claren-
don Alumina Production Ltd (CAP) to
improve efficiency and maintain op-
erations during the period of weak
global conditions, budgetary support
for national priorities such as educa-
tion and road maintenance as being
achievable through financing under
Petrocaribe. The most important intan-
gible benefit as highlighted by Jamaica
and many other countries is the ability
to have an assured supplier of Petro-
leum products with attractive payment
terms. As a result Jamaica has consis-
tently purchased the allowed quota
(now 23.5KBD) from Venezuela to
Petrocaribe Agreement the Caribbean’s Oil
Knight in Shining Armor? continued from page 2/
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Venezuela Confirms Buys Jets From Brazil’s
Embraer >> 03/12/2011
page 4 Call: 1-876-927-1779 | Caribbean Petroleum Update : December 2011
C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )
assist with supplying the local market
and for processing at the Petrojam re-
finery. On a monthly basis between
50%-70% of Crude and 30- 50% of
refined products are purchased (varies
based on demand).
Guyana since signing the agreement
has been able to increase the electricity
generating capacity of the country and
has also embarked on several social
programs. It is worth highlighting that
all countries that are party to the Petro-
caribe Agreement have benefited in
more ways than one particularly
through the social projects in the areas
of tourism, education, health, housing,
environmental sanitation, road net-
works, sports and agriculture. Some
of the projects were further aided un-
der the framework of the Alba Caribe
Fund. Below is a summary of the ar-
eas in which each country has bene-
fited.
Issues impacting the Agreement
Although the agreement is seen by
signatory countries as “the best thing
since sliced bread” a few challenges
were highlighted. Some of these chal-
lenges for example in the case of
Belize (no imports under the Agree-
ment since 2008) include issues such
as, high transportation and distribu-
tion cost due to geographic location.
Other issues that affected Belize were
the fact that the government estab-
lished/allowed a private company
(Petro-fuels) to manage the purchase
and importation of fuels from Vene-
zuela under the Agreement and this in
itself created numerous problems for
the Government of Belize. The most
impacting of which is the inability to
import due to the
closure of this
facility although
lower duties were
offered for im-
ports by Petrofu-
els to facilitate
ease of imports. In
addition, it was
noted also that the Petro-fuels facility
was not of the standard required by
Venezuela and competing marketing
companies in Belize who were sole
importers prior to Petrofuels were not
benefiting from the lowered duties
offered to Petrofuels. Belize is cur-
rently exploring avenues through
which they can resume imports under
the Agreement in order to also benefit
from the financing provided.
Other countries highlighted inadequate
storage in the early years as a hin-
drance to drawing down on their al-
lowed quota. In addition some had
concerns that Venezuela at any point
in time could indicate that they would
not be able to supply fuels and as such
some maintained purchases from other
suppliers on a month on month off
basis. Concerns were also raised with
the fact that the Agreement was
changed from a 5-year agreement to a
1-year agreement i.e. countries would
be required to sign every year to bene-
fit.
In conclusion however, all countries
that have been assessed cited the
Petrocaribe Agreement as being very
beneficial for them. Some even
alluded to the fact that they wish they
could access more than the current
quota. Overall, despite the concerns
mentioned above, the Agreement is
seen as a savior for the region largely
due to the fact that many countries
have been able to establish needed so-
cial progammes with cheap financing
while at the same time accessing a
much needed resource.
Petrocaribe Agreement the Caribbean’s Oil
Knight in Shining Armor? continued from page 3/
Caribbean Petroleum Update : December 2011 | Call: 1-876-927-1779 page 5
C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )
REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP
January - December 2011
Retail prices for Regular Unleaded Gasoline in the sixteen Caribbean countries reviewed at the end of December, remained
relatively stable in six countries. Consumers in eight other countries were relieved to see reduction in prices while prices in
the remaining two countries showed slight increases. The average retail price at the end of December 2011 for the product
over the sixteen countries when compared to the average retail price seen in January 2011 showed and overall 12% in-
crease.
NOTE:
*US Gallon = 3.785 L
*Imperial Gallon = 4.546 L
*As at November 1, 2009 MTBE was phased out from all gasoline
blends in Jamaica and replaced with 10% Ethanol.
Table : Regular Unleaded Gasoline Average Retail Price (US$/Litre)
2 0 1 1
COUNTRIES JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC AVG
ANTIGUA/ BARBUDA 1.00 1.00 1.07 1.15 1.25 1.33 1.30 1.30 1.30 1.30 1.23 1.23 1.21
BAHAMAS [91 OCT] 1.24 1.25 1.30 1.46 1.47 1.47 1.45 1.43 1.44 1.34 1.37 1.35 1.38
BARBADOS 1.47 1.48 1.49 1.59 1.59 1.59 1.59 1.66 1.66 1.60 1.60 1.56 1.57
BELIZE [87 OCT] 1.33 1.34 1.48 1.50 1.54 1.51 1.49 1.51 1.44 1.47 1.37 1.38 1.45
B.V.I [87 OCT] 1.12 1.13 1.20 1.26 1.26 1.27 1.25 1.22 1.22 1.22 1.22 1.25 1.22
DOMINICA 1.01 1.05 1.06 1.11 1.21 1.24 1.22 1.22 1.22 1.17 1.14 1.13 1.15
GRENADA (95 OCT) 1.05 1.06 1.17 1.23 1.29 1.32 1.29 1.29 1.31 1.28 1.23 1.23 1.23
GUYANA 0.99 0.99 1.06 1.08 1.08 1.12 1.15 1.14 1.14 1.14 1.14 1.11 1.10
JAMAICA 87 Octane[E10] 1.17 1.18 1.25 1.28 1.29 1.29 1.31 1.29 1.28 1.25 1.24 1.23 1.26
MONTSERRAT 1.13 1.14 1.18 1.27 1.38 1.42 1.35 1.32 1.32 1.27 1.23 1.23 1.27
ST. KITTS/ NEVIS 1.04 1.07 1.20 1.13 1.14 1.23 1.27 1.28 1.28 1.29 1.29 1.23 1.20
ST. LUCIA 1.14 1.14 1.16 1.22 1.27 1.28 1.28 1.27 1.25 1.21 1.21 1.21 1.22
ST. VINCENT/GRENADINES 0.99 0.98 1.00 1.06 1.10 1.17 1.24 1.24 1.23 1.22 1.20 1.19 1.13
SURINAME [95 OCT] 1.21 1.32 1.34 1.47 1.55 1.51 1.48 1.48 1.45 1.40 1.42 1.40 1.42
TRINIDAD/[92 OCT] 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42 0.42
TURKS/ CAICOS 1.36 1.36 1.42 1.42 1.45 1.55 1.61 1.60 1.60 1.54 1.58 1.58 1.51
page 6 Call: 1-876-927-1779 | Caribbean Petroleum Update : December 2011
C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )
REGULAR UNLEADED GASOLINE AVERAGE PRICES AT THE PUMP
January - December 2011
CHART
See prices for other products at See prices for other products at See prices for other products at www.ceiswww.ceiswww.ceis---caribenergy.orgcaribenergy.orgcaribenergy.org ...
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
US$
/Litr
e
16 Caribbean Countries
Comparative Retail Pump PricesRegular Unleaded Gasolline
December Avg vs 12 Mths Avg (Jan - Dec 2011)
Dec Avg
12 Mths Avg
Caribbean Petroleum Update : December 2011 | Call: 1-876-927-1779 page 7
C A R I B B E A N E N E R G Y I N F O R M A T I O N S Y S T E M ( C E I S )
International Crude Oil prices over the period October
to December 2011 saw prices on the upward trend in
December when compared to the two previous
months. The highest weekly price seen in December
for the product was US$100.08/BBL - reflected at the
end of the 2nd week. This price came after a period of
3 months with prices averaging below US$100/BBL.
The average monthly price seen for December was
approximately US$99/BBL. This average price was
11% above the average price seen for the month of
December in 2010 and 140% above the December
average during the record oil price year of 2008.
Speculations are that prices will remain close to the
US$100/BBL if issues regarding Iran Nuclear project
are not resolved. Saudi Arabia has proposed to in-
crease their output in order to boost supplies in
Europe.
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primary report of historical annual petroleum energy
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Included are data on total energy production,
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BL
US$/B
BL