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FM AMEMBASSY BRIDGETOWN
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RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL
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RUEHCV/USDAO CARACAS VE

C O N F I D E N T I A L BRIDGETOWN 000344 
 
SIPDIS 
 
SIPDIS 
 
SANTO DOMINGO FOR FCS 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: DECL: 02/17/2016 
TAGS: PGOV PREL ENRG EPET ETRD VC VE TD XL
SUBJECT: ST. VINCENT'S DISPUTE WITH TEXACO CONTINUES: WILL 
VENEZUELA STEP IN? 
 
REF: A. 05 BRIDGETOWN 2417 
 
     ¶B. 05 BRIDGETOWN 2377 
     ¶C. 05 BRIDGETOWN 2085 
 
Classified By: DCM Mary Ellen T. Gilroy for reasons 1.4 (b) 
and (d). 
 
 ¶1. (C) Summary: The dispute between the Government of St. 
Vincent and the Grenadines (GOSV) and Texaco over the price 
of liquefied petroleum gas (LPG) has continued since the 
company threatened in November 2005 to stop supplying the 
island with the fuel unless the government-regulated price is 
raised.  Some progress was made during a January 2006 meeting 
between the GOSV and Texaco, and Prime Minister Ralph 
Gonsalves said thereafter that he hopes an agreement could be 
reached.  In the meantime, the GOSV is discussing options for 
obtaining the fuel from Trinidad and Venezuela, which has 
already sent two shipments of LPG to St. Vincent. 
Significantly, PM Gonsalves told Parliament that this is not 
a political issue but one of obtaining LPG at the best 
possible price, and avoided blaming the U.S. for the 
situation.  The PM had previously accused the USG of 
instructing Texaco to cut off supplies of LPG in order to 
undermine him politically.  End summary. 
 
----------------------------- 
Dispute With Texaco Continues 
----------------------------- 
 
¶2. (C) The GOSV and Texaco failed to reach an agreement on 
the government-regulated price of LPG sold in St. Vincent, 
leading the company to threaten to stop supplying the cooking 
fuel used in nearly every home on the island.  Texaco has 
argued that the artificially low government-regulated price 
has forced it to sell the fuel at a loss.  When it did not 
receive an adequate response from the GOSV, Texaco informed 
its St. Vincent distributor of LPG on November 7, 2005, that 
the oil company would cut off supplies of the fuel in one 
month, December 7, which happened to be the same day as St. 
Vincent's national election.  This unfortunate coincidence 
led to a confrontation between the President of 
Chevron-Texaco Eastern Caribbean and Prime Minister 
Gonsalves, during which the PM accused Texaco of conspiring 
with the USG to undermine his chances for re-election (ref 
B). 
 
--------------------------------------------- 
PM Gonsalves Goes Public With Texaco's Threat 
--------------------------------------------- 
 
¶3. (U) PM Gonsalves met again with the Texaco representative 
in January 2006 to discuss a possible LPG price increase. 
Texaco has asked that the retail price at which the cooking 
fuel is sold to the public be raised from US$11 per 20-pound 
bottle to US$15.  The parties did not, however, come to an 
agreement.  Following the meeting, PM Gonsalves spoke of the 
impasse in Parliament and informed the country of the 
company's threat to end shipments of LPG.  The PM explained 
that he hopes an agreement could still be reached and has 
asked Texaco to provide information justifying the price 
increase.  The GOSV has also announced that it has begun to 
explore options for obtaining emergency supplies of LPG, and 
Gonsalves has spoken with Trinidad and Tobago Prime Minister 
Patrick Manning and Venezuela President Hugo Chavez about 
these oil-producing countries providing LPG to St. Vincent. 
 
------------------------------- 
Texaco, the Perennial Scapegoat 
------------------------------- 
 
¶4. (C) Stephen Babb, President of Chevron-Texaco Eastern 
Caribbean, and Maria Pis-Dudot, Chevron-Texaco Public and 
Government Relations officer for the Western Hemisphere (both 
based in Florida), told Econoff that their company is used to 
playing the scapegoat for increases in government-regulated 
energy prices.  They believe PM Gonsalves went public with 
the Texaco price dispute in order to prepare St. Vincent for 
an increase in the price of LPG price and to place the blame 
for this on the company.  In his January meeting with the PM, 
Babb said Gonsalves took a conciliatory tone, explaining that 
he understands companies need to make a return on their 
investment.  The PM went on to say that St. Vincent is better 
off with competition in the energy sector - suggesting that, 
despite being one of the strongest supporters of PetroCaribe, 
Gonsalves does not want to be completely dependent on 
Venezuelan petroleum.  The Texaco officials hope the GOSV 
 
will agree to raise the price of LPG after the company's next 
meeting with the PM on February 27. 
 
------------------------ 
Venezuela to the Rescue? 
------------------------ 
 
¶5. (U) Venezuela recently sent two shipments of LPG to St. 
Vincent, although these were not necessarily connected to the 
dispute with Texaco.  The first shipment arrived in December 
2005 just days before St. Vincent's national election (ref 
A); the second shipment arrived in January 2006.  The GOSV 
sold the Venezuelan LPG for US$9 per container, which is 
below the regular government-controlled price of US$11. 
While the availability of low cost fuel may have assisted PM 
Gonsalves's re-election, circumstances surrounding the 
shipments demonstrate the difficulty St. Vincent may face in 
continuing to obtain LPG from Venezuela. 
 
¶6. (U) The LPG from Texaco is delivered economically in bulk 
shipments that are piped from ships to a storage tank on St. 
Vincent.  From there, the LPG is transferred to small 
20-pound metal bottles that are sent to distributors who sell 
directly to consumers.  In contrast, the LPG delivered from 
Venezuela was already in individual 22-pound bottles that 
were packed into shipping containers.  A photo on the GOSV 
website showed the bottles being taken out of the shipping 
containers by hand, a process that must have taken 
considerable time considering that the December shipment 
included 7,200 bottles of LPG.  To complicate matters 
further, the Venezuelan bottles were not compatible with the 
existing equipment on St. Vincent that allows LPG bottles to 
be refilled.  The GOSV has had to import special equipment or 
be faced with thousands of worthless metal canisters. 
 
------- 
Comment 
------- 
 
¶7. (C) It remains unclear whether the two Venezuelan 
shipments of LPG were carried out as part of the PetroCaribe 
oil agreement, despite public statements by the GOSV that 
they were.  St. Vincent has yet to finalize the internal 
arrangements necessary to begin receiving petroleum products 
under PetroCaribe (ref C).  Furthermore, the difficulties 
encountered with the shipments of LPG suggest that these were 
undertaken with little planning and may have been a personal 
gesture by Hugo Chavez to help the political fortunes of his 
friend Ralph Gonsalves. 
 
¶8. (C) PM Gonsalves's public statement that he hopes to reach 
an agreement with Texaco stands in sharp contrast to his 
earlier charge that the USG was behind the company's threat 
to stop LPG shipments.  While Gonsalves's paranoia is 
unfounded, his anger at Texaco's threat to end shipments the 
same day as St. Vincent's national election is 
understandable.  The Texaco representative who chose that 
cut-off date was clearly uninformed about local politics. 
The fact that PM Gonsalves told the nation that the GOSV 
could countenance some form of a LPG price increase suggests 
that his earlier anger over the incident has subsided and the 
recent adversaries may still reach a mutually beneficial 
agreement.  Additionally, his comments on valuing competition 
and private investment in the energy field suggest Gonsalves 
has some doubts about Venezuela's ability to reliably meet 
all of his country's energy needs through PetroCaribe.  End 
comment. 
KRAMER