US Caribbean energy summit seeks ways to ease region away from shaky Venezuela oil program

US Caribbean energy summit seeks ways to ease region away from shaky
Venezuela oil program
Published January 24, 2015 Associated Press

MIAMI – A decade-long addiction to oil subsidized by Venezuela may be
coming to an end for several Caribbean nations, with a nudge from the
United States.

Fears that falling oil prices could knock the wheels off the already
wobbly economy of oil-dependent Venezuela have sparked apparent interest
in alternatives to Petrocaribe, a trade program created by the late
President Hugo Chavez that has kept the region dependent on the South
American country for energy.

Evidence of that interest will be on display Monday as Caribbean leaders
converge in Washington for the first Caribbean Energy Security Summit,
hosted by Vice President Joe Biden. Plans for the event have been in the
works for months, but with oil recently falling to below $50 a barrel, a
sense of urgency has emerged given Venezuela's increasingly precarious
situation.

"It's absolutely the case that the economic situation has deteriorated
for Venezuela and therefore the risk has gone up for all of these
countries," said David Goldwyn, an energy consultant and former State
Department special envoy who has been involved in organizing the summit.

All the countries of the region, except Cuba, are expected to
participate in closed talks that will involve Biden and other U.S.
officials as well as representatives of the European Union, the U.N.,
and multilateral financing agencies such as the World Bank and
Inter-American Development Bank.

The focus will be on exploring ways to help Caribbean countries convert
diesel-powered energy plants to natural gas and increase use of other
alternative energy sources. Such moves would reduce the nearly complete
dependence on oil that has made energy expensive in the region and
created the opening for Venezuela in the first place.

In practical terms, the summit is intended to offer technical
assistance, help obtaining financing and advice on regulatory changes
that can attract investment, said an official with the vice president's
office involved in the event.

The word "Venezuela" may not even get mentioned, but it will be on
everyone's minds. "These folks are in a situation where Petrocaribe is
not as sweet of a deal as it used to be," said the official, who spoke
on condition of anonymity to discuss the private, multilateral talks in
Washington.

At the moment, there is no sign that Venezuela will end Petrocaribe.
Earlier this month, President Nicolas Maduro praised it as a "guarantee
of peace, stability, mutual benefit, shared development and fair
commerce shared by the entire Caribbean." Still, a prolonged collapse of
oil prices could sink an economy already in a deep recession or Caracas
could be forced to commit its exports to China to meet its own debt
obligations.

Caribbean governments began signing on to Petrocaribe in 2005 as a spike
in oil prices sent energy and car-fuel costs soaring. Venezuela, which
created the program as part of an effort to counter U.S. influence in
the region, provides oil and refined products such as diesel at market
prices, but it requires member countries to pay only a small portion of
the cost up front and allows them to finance the rest under generous
long-term debt agreements, as well as to barter for agricultural
products or services.

That has given Petrocaribe members more cash to fund their perennially
strapped governments. Haiti alone said in a recent report it has
financed dozens of public works projects over the past five years that
would have been impossible without Petrocaribe.

But there have been downsides. It has discouraged the Caribbean from
trying to become more self-sufficient and shift to natural gas, which
produces fewer greenhouse gases and would make their economies more
competitive by bringing down energy costs. "It's a little bit like
addiction. It's hard for them to break it," said Goldwyn, who is a
co-author of a report on Petrocaribe by the Atlantic Council's Adrienne
Arsht Latin America Center, which is organizing a public portion of
Monday's summit.

Petrocaribe also has increased indebtedness, adding $3 billion alone to
the obligation owed by Jamaica, where the public debt stands at 130
percent of GDP. And, if the program were to fall apart, it would leave
its 17 members struggling for alternatives.

"I just don't think it's going to be around much longer, or at least not
in its full form," said Peter Schechter, director of the Atlantic
Council's Latin America Center. "We don't want our closest neighbors in
the Caribbean to suddenly be surprised by a situation in which Venezuela
is suddenly unable to provide oil."

Source: US Caribbean energy summit seeks ways to ease region away from
shaky Venezuela oil program | Fox Business -
http://www.foxbusiness.com/markets/2015/01/24/us-caribbean-energy-summit-seeks-ways-to-ease-region-away-from-shaky-venezuela/