VZCZCXRO5901
OO RUEHROV
DE RUEHEG #6325 2841500
ZNY CCCCC ZZH
O 111500Z OCT 06
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1938
INFO RUCNFUR/DARFUR COLLECTIVE
RUEHKH/AMEMBASSY KHARTOUM 1057

C O N F I D E N T I A L PANAMA 001999 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: DECL: 09/21/2016 
TAGS: PREL PGOV PTER UNSC MOPS PHUM ARABL EG SU
SUBJECT: GOP SCHIZOPHRENIC ON VENEZUELAN FUEL IMPORTS 
 
REF: A. PANAMA 1293 
     ¶B. PANAMA 1213 
     ¶C. PANAMA 1518 
 
Classified By: Deputy Chief of Mission L. Arreaga for reasons 1.4 (b) a 
nd (d) 
 
¶1. SUMMARY.  (C) GOP Energy policy remains divided as the 
Ministry of Industry and Commerce (MICI) pursues divergent 
paths to ensure an affordable supply of petroleum for Panama. 
 MICI Vice-Minister Jose Paredes stated publicly that the new 
Panamanian state run oil company would not distribute fuel, 
but serves as the vehicle by which the GOP could negotiate a 
refinery, importation of gas and fuel, and join regional 
energy initiatives with Central America, Colombia and 
Venezuela (Refs A & B).  A high-ranking MEF official, 
however, told Econchief that he expects nothing substantive 
to come of the talks with Venezuela nor the GOP's proposed 
company.  MICI announced in July that fuel storage capacity 
would be made available to the Venezuelan-Panamanian 
consortium, Lucky Petrol and Codetrap (Ref C) via tanks that 
are currently part of a GOP concession to Chevron. 
Chevron-Texaco country manager confirmed to Econoff that its 
Fuel and Marine Marketing (FAMM) division is negotiating with 
MICI to transfer 11 of its 19 tanks in Panama to the GOP. 
 
----------------------------------------- 
VENEZUELAN FUEL: IT'S ALL ABOUT THE TANKS 
----------------------------------------- 
 
¶2. (SBU) Codetrap (Ref C) representatives say they expect an 
initial shipment of 40,000 barrels of gas and diesel from 
Venezuela, with subsequent shipments reaching the authorized 
quota of 250,000 barrels.  The Secretary of the 
Venezuelan-Panamanian Chamber of Commerce told the press that 
the elimination of the middleman would result in fuel prices 
15% below the current market.  Industry sources told Econoff 
that to their knowledge, no such shipments have occurred or 
are scheduled to occur.  In order to receive such a shipment, 
Codetrap needs storage facilities for the fuel. 
 
¶3. (C) A Chevron-Texaco (C-T) executive told Econoff that its 
FAMM division owns 19 tanks in Panama, all located on GOP 
leased land.  Five are in Cristobal (Atlantic Coast) and 
fourteen in Balboa (Pacific Coast).  C-T is currently using 
five (all located in Balboa).  Three tanks are scheduled to 
be demolished, having been out of service for more than 30 
years.  The C-T executive told Econoff that the remaining 11 
tanks are noncompliant with environmental and C-T corporate 
guidelines and that FAMM presented a formal proposal to MICI 
in mid-August to transfer the tanks to the GOP.  FAMM and a 
C-T environmental team are currently working in parallel to 
prepare them for the transfer.  The C-T executive did not 
provide an estimate of when the tanks might be operational. 
 
--------------------------------------------- ------ 
OIL EXECUTIVES TROUBLED BY POSSIBLE GOP RUN COMPANY 
--------------------------------------------- ------ 
 
¶4. (SBU) Petroleum industry representatives met with Paredes 
in July to express their concerns about the legislation 
authorizing the creation of a state run petroleum company. 
The American Chamber of Commerce Hydrocarbons committee sent 
a formal letter to Minister of Trade Alejandro Ferrer in 
August.  The letter highlighted the destabilizing impact of a 
state run company on Panama's free market investment climate, 
the unfair competition, the low fuel prices enjoyed by Panama 
compared to its neighbors, the historical ineffectiveness of 
state run fuel companies in Latin America to deliver 
competitive prices, and the stability and security of fuel 
supply enjoyed by Panama from its private sector hydrocarbons 
suppliers.  Industry representatives told Econoff that have 
yet to receive an adequate reply from the GOP.  A senior MEF 
official told Econchief that the GOP recognizes the inherent 
conflict in regulating a market in which they are a 
participant. He does not expect any substantive development 
of the state run company. 
 
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COMMENT 
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¶5. (SBU)  GOP energy policy continues to be managed 
incohesively across two ministries.  Although some GOP 
leaders appear anxious to pursue Venezuelan fuel imports and 
an active GOP involvement in the market, others continue to 
seek a private sector solution.  Although the average 
Panamanian citizen would probably view fuel from Venezuela 
favorably, it is unlikely this can occur prior to the October 
22 Canal referendum given the refurbishment needed by the 
proposed storage tanks. 
EATON