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)

ceis@src-jamaica.org

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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Petrobras' CEO participates in Global Pact meeting at UN

Headquarters >> 16/12/2011

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Guyana within reach of becoming elite oil and gas economy –

President at commissioning of Shell Bel Air Park Service

Station >> 09/12/2011

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Chevron >> 08/12/2011

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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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