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FM AMEMBASSY BRIDGETOWN
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INFO RUCNCOM/EC CARICOM COLLECTIVE
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RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL
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RUEHCV/USDAO CARACAS VE

UNCLAS SECTION 01 OF 02 BRIDGETOWN 000602 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
SANTO DOMINGO FOR FCS 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ENRG EPET ETRD VC VE XL
SUBJECT: PETROCARIBE UPDATE #20: TEXACO AND VENEZUELA 
SUPPLY FUEL TO ST. VINCENT 
 
REF: A. BRIDGETOWN 344 
     ¶B. 05 BRIDGETOWN 2085 
 
¶1. (SBU) Summary:  The Government of St. Vincent and the 
Grenadines (GOSV) and Texaco have settled their dispute over 
the pricing of liquefied petroleum gas (LPG), with the GOSV 
agreeing to increase the government-regulated price of this 
cooking fuel used in nearly every home on the island.  The 
Governments of Venezuela and St. Vincent, meanwhile, plan to 
establish a joint company in St. Vincent to sell LPG supplied 
through the PetroCaribe oil accord.  St. Vincent will also 
receive diesel fuel from Venezuela for use in generating 
electricity but will not get the gasoline the GOSV had hoped 
for.  These developments suggest that St. Vincent, and 
possibly other Eastern Caribbean countries, have lowered 
their expectations regarding the benefits they will receive 
from PetroCaribe, with Venezuela becoming just one of several 
suppliers of energy to the region.  End summary. 
 
------------------------------- 
St. Vincent Settles With Texaco 
------------------------------- 
 
¶2. (U) The Government of St. Vincent has settled its dispute 
with Texaco over the pricing of LPG the company supplies to 
the island.  The GOSV has agreed to increase the 
government-regulated retail price of LPG from US$11 for a 
20-pound container of the home cooking fuel to US$13, which 
is lower than the US$15 price sought by Texaco.  The GOSV 
also agreed to a new price structure for LPG that will 
provide a guaranteed profit margin to Texaco as the importer 
and wholesaler of the fuel, as well as to the various retail 
distributors.  A Texaco official explained to Econoff that 
while the company did not get as high a price increase as it 
had hoped for, the new arrangement is satisfactory.  In an 
odd twist, several days after the GOSV's March 31 
announcement of the new price of LPG, Prime Minister Ralph 
Gonsalves told the press that he was out of the country at 
the time his Cabinet decided on the price rise and would have 
made Texaco settle for less. 
 
--------------------------------- 
Texaco Threatened to Cut Off Fuel 
--------------------------------- 
 
¶3. (U) The GOSV's failure to respond to earlier requests by 
Texaco to raise the price of LPG led the company to threaten 
a cut off of supplies to the island.  While PM Gonsalves 
initially expressed indignation over this threat, he 
eventually took a more conciliatory tone toward Texaco, 
indicating that he hoped to reach an agreement with the 
company (ref A).  Texaco currently ships to St. Vincent all 
the LPG used in country with the exception of two limited 
shipments recently received from Venezuela.  Once it arrives 
on the island, Texaco sells the LPG at a wholesale price to 
several local distributors that then sell the home cooking 
fuel to consumers.  Texaco also sells LPG to consumers at its 
gas stations on the island.  By keeping the 
government-regulated retail price artificially low, Texaco 
argued that it could not sell to consumers, nor charge local 
distributors a wholesale price, that covered its shipping 
costs. 
 
------------------------------------------ 
Venezuelan Fuel Sent as a Stopgap Measure 
------------------------------------------ 
 
¶4. (SBU) The two shipments of LPG sent to St. Vincent by 
Venezuela in December 2005 and January 2006 were stopgap 
measures intended to fill any fuel shortage caused by a 
potential cut-off by Texaco, according to a high-ranking GOSV 
official who advises PM Gonsalves on energy matters.  The 
Venezuelan LPG was sent to St. Vincent at the last minute, 
which accounts for the inefficient manner in which it was 
shipped, in thousands of individual metal containers rather 
than more economical bulk shipments.  The timing of the 
shipments, the first of which arrived just prior to St. 
Vincent's December 2005 general election, led to speculation 
that they were also intended to shore up the electoral 
prospects of the PM.  Gonsalves is one of Venezuela President 
Hugo Chavez's most ardent supporters in the region. 
 
--------------------------------------------- ------- 
Venezuela to Establish a Fuel Company in St. Vincent 
 
BRIDGETOWN 00000602  002 OF 002 
 
 
--------------------------------------------- ------- 
 
¶5. (SBU) Future LPG imports should arrive from Venezuela in 
bulk shipments as part of a joint Vincentian/Venezuelan 
venture to establish a LPG distribution company in St. 
Vincent, the government advisor explained recently to Poloff. 
 The parastatal company will distribute the LPG St. Vincent 
receives through the PetroCaribe oil accord's concessionary 
financing scheme.  This arrangement could allow the new 
company to undersell existing distributors, although the GOSV 
has yet to determine a pricing scheme or a start date for the 
company. 
 
--------------------------------------------- --- 
St. Vincent Will Get Diesel Fuel But No Gasoline 
--------------------------------------------- --- 
 
¶6. (SBU) St. Vincent will also obtain from Venezuela diesel 
fuel that will be used by VINLEC, the government-owned 
electric company.  PetroCaribe's concessionary financing will 
allow the GOSV to lower electricity prices that have risen 
during the past year as a result of increases in world oil 
prices.  St. Vincent is unlikely to receive gasoline from 
Venezuela because of the difficulty involved in distribution. 
 The GOSV had intended for a parastatal company to sell 
gasoline obtained through PetroCaribe, but this plan would 
have involved the expense of constructing several new gas 
stations on the small island (ref B). 
 
------- 
Comment 
------- 
 
¶7. (SBU) The GOSV's willingness to raise LPG prices and reach 
a settlement with Texaco indicates that despite Gonsalves's 
enthusiasm for PetroCaribe, the PM recognizes the need to 
keep the private sector supplying energy to St. Vincent. 
With the exception of the two small LPG shipments cited 
above, neither St. Vincent, nor any of the other Eastern 
Caribbean countries that signed on to the PetroCaribe 
agreement with great fanfare back in June 2005, have received 
benefits from it.  Instead, they have experienced a degree of 
frustration in attempting to implement a plan that does not 
appear to have been fully thought through.  Rather than 
Venezuela gaining dominance over the energy sector in the 
Eastern Caribbean, developments in St. Vincent suggest that 
Venezuela may become just another competitor in the regional 
energy market. 
KRAMER