VZCZCXRO2439
PP RUEHGR
DE RUEHWN #1254/01 1991849
ZNR UUUUU ZZH
P 181849Z JUL 06 ZDK
FM AMEMBASSY BRIDGETOWN
TO RUEHC/SECSTATE WASHDC PRIORITY 2947
INFO RUCNCOM/EC CARICOM COLLECTIVE
RUEHCV/AMEMBASSY CARACAS 1472
RUMIAAA/HQ USSOUTHCOM J2 MIAMI FL
RUMIAAA/HQ USSOUTHCOM J5 MIAMI FL
RUEHCV/USDAO CARACAS VE

UNCLAS SECTION 01 OF 02 BRIDGETOWN 001254 
 
SIPDIS 
 
SIPDIS 
 
SOUTHCOM ALSO FOR POLAD 
 
E.O. 12958: N/A 
TAGS: ENRG EPET PGOV PREL GJ VE XL
SUBJECT: PETROCARIBE UPDATE #24:  GRENADA'S PLAN FOR 
VENEZUELAN OIL 
 
REF: BRIDGETOWN 1127 
 
BRIDGETOWN 00001254  001.2 OF 002 
 
 
¶1. (SBU) Summary:  The Government of Grenada (GOG) hopes to 
use the PetroCaribe oil accord to import diesel supplied by 
PDVSA, Venezuela's state-owned oil company, as a means to 
gain leverage over Grenada's privately owned electric company 
and convince it to lower rates charged to consumers.  At 
present, the GOG plans to receive only diesel and aircraft 
fuel directly from PDVSA and does not foresee involvement in 
a proposed regional storage facility that would serve the 
Eastern Caribbean.  Grenada's strategy for utilizing 
Venezuelan oil made available through PetroCaribe's 
concessionary financing scheme resembles that of other 
Eastern Caribbean countries, as it does not appear to provide 
a means to lower fuel prices without incurring additional 
debt.  End summary 
 
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Government Wants to Influence Energy Sector 
------------------------------------------- 
 
¶2. (SBU) The Government of Grenada hopes to use diesel and 
aircraft fuel supplied through the PetroCaribe oil accord to 
gain influence in the energy sector of Grenada's economy. 
The petroleum products will be imported by PetroCaribe 
Grenada Ltd., a parastatal company established by the GOG 
(reftel), which will sell aircraft fuel to the Government-run 
airport authority and diesel to GRENLEC, Grenada's privately 
owned electric company.  This plan is intended to allow the 
GOG to re-enter the energy sector, in which it has not been 
involved since GRENLEC was privatized in 1994, according to 
John Auguste, the GOG's senior civil servant for energy 
issues. 
 
-------------------------------------- 
Lower Electricity Prices Should Follow 
-------------------------------------- 
 
¶3. (SBU) With the Government, in effect, supplying diesel to 
GRENLEC, the hope is that the private company can be 
convinced to lower electricity rates charged to consumers, 
Auguste explained to Poloff.  Exactly how this would be 
accomplished without the GOG selling the diesel at a price 
lower than GRENLEC currently pays to Texaco, and thus 
incurring debt, remains unclear.  Auguste spoke vaguely of 
the GOG more cost effectively maintaining the facilities used 
to offload from ships and store diesel as a means to offer 
the fuel at a lower cost.  The GOG, as the supplier of diesel 
to the electric company, would also have combined political 
and commercial leverage with which to convince GRENLEC to 
lower prices.  In either case, the GOG needs to open a 
dialogue with GRENLEC, which has not yet begun according to 
the company's American owner (reftel). 
 
-------------------------------------------- 
Government Lost Control of Electricity Rates 
-------------------------------------------- 
 
¶4. (SBU) Part of the rationale for attempting to gain some 
control of the energy sector comes from the GOG's 
disappointment over the manner in which it privatized GRENLEC 
in 1994, according to Auguste, who has been working on energy 
issues in Grenada for twenty years.  The legislation that 
authorized the sale of the company failed to give the GOG the 
means to regulate rates charged by the electricity monopoly, 
a common practice of municipal governments in the U.S. 
Making matters worse is the fact that Minister of Energy 
Gregory Bowen was the longtime manager of Government-owned 
GRENLEC.  Whereas Bowen used to have control over energy 
rates in his former position, the Minister now &kicks 
himself8 over his current lack of influence, said Auguste. 
 
----------------------------------------- 
No Benefit from Regional Storage Facility 
----------------------------------------- 
 
¶5. (SBU) Grenada does not currently intend to utilize a 
proposed regional storage facility for Venezuelan oil.  The 
facility, which would use existing tanks in Antigua to store 
oil for the Eastern Caribbean nations that are part of 
PetroCaribe, does not offer any economic benefit to Grenada, 
argued Auguste.  As the Eastern Caribbean country closest to 
Venezuela, Grenada believes it could more cheaply import oil 
directly without having to go through Antigua at the extreme 
northern end of the region.  The GOG energy official, who 
participated in several regional meetings regarding 
 
BRIDGETOWN 00001254  002 OF 002 
 
 
PetroCaribe, said that it was a number of such objections 
from Grenada and other countries that have indefinitely 
delayed the proposed start-up of the Antigua storage facility. 
 
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Comment 
------- 
 
¶6. (SBU) Grenada's plan for utilizing PetroCaribe oil appears 
to be as poorly thought through as those in other Eastern 
Caribbean countries.  The GOG hopes that by supplying diesel 
to the nation's sole electric utility it can lower rates, but 
does not yet have a clear idea how to do so without offering 
the fuel at a low price and incurring debt.  It could, of 
course, pressure GRENLEC into lowering rates, but such 
heavy-handed tactics would scare off future private 
investment.  The fact that Grenada sees no benefit from a 
regional approach to importing and distributing Venezuelan 
oil suggests, as Post has reported previously, that each of 
the Eastern Caribbean countries is going it alone with regard 
to PetroCaribe, thereby missing what little opportunity they 
may have had to maximize its benefits to the Organization of 
Eastern Caribbean States (OECS) countries as a group. 
KRAMER