Will the terms of the PetroCaribe deal change for Guyana?

In the context of reports that Venezuela might be raising the cash payments and long-term interest rates for PetroCaribe members, opposition members of parliament have expressed concern about the consequences for Guyana.

Under the original terms of the PetroCaribe agreement, countries pay 40 per cent of the bill within the first 90 days and finance the rest at very low interest rates (1 per cent) over a period of 25 years. There is a clause which requires countries to pay more if the price of oil falls below US$80 per barrel.

However, reports state that Guatemala was offered by Venezuela an interest rate of between 2 and 4 per cent with more of the bill paid up front. These changes have prompted Guatemala to exit the arrangement.

In addition, the Dominican Republic is only receiving about half the 50,000 barrels per day it had been promised by Venezuela.

Sunday Stabroek columnist Andres Oppenheimer (see page 20) has said that Venezuela has raised from 50 to 60 per cent the cash payment it demands from member countries, and that it is also raising interest rates on their long term oil debts.

Efforts to reach officials in government for a comment on the state of PetroCaribe and whether the terms for Guyana are changing, including Prime Minister Sam Hinds, Minister of Foreign Affairs Carolyn Rodrigues-Birkett and Head of the Guyana Energy Agency Mahender Sharma proved futile.

Speaking to Sunday Stabroek  yesterday, Deputy Speaker and Shadow Minister of Foreign Affairs Deborah Backer said that the PetroCaribe deal has benefited Guyana and her party would be very unhappy if it fails.

“Venezuela last year was our biggest creditor and this was because of the PetroCaribe deal. As a country we would be very unhappy if there were any changes to the deal. It is very favourable to us and any failure of it will have a very negative economic impact,” Backer said.

But at this point she plugged the need for alternative energy and a weaning off of the dependence on fossil fuels. “We have been saying long ago that we have to look at alternative forms of energy. No deal lasts forever,” she said. “We believe that there should be a policy to reduce the dependence on fossil fuel,” she said.

Speaking as well on the issue, APNU Member of Parliament Dr Rupert Roopnaraine said that Venezuela is in the throes of internal turmoil. “President Nicolás Maduro is under pressure… we have to also see things in light of the incursions made on August 31 and on October 10. We are seeing new uncertainty and instability in the relationship between Guyana and Venezuela,” said Roopnaraine. He went on to observe that the consequences of a failed PetroCaribe scheme will be very damaging for the rice and energy sectors in Guyana.

Trinidad and Tobago’s Planning Minister Dr Bhoe Tewarie said recently that the PetroCaribe initiative was unlikely to be sustainable. According to news reports carried by this newspaper, Tewarie, speaking in his capacity as acting Minister of Energy and Energy Affairs at the launch of Caricom Energy Week early in November, said the scheme provided a partial and temporary solution in response to the oil crisis.

Analysts believe that the changes to the pact are due in part to Venezuela having promised a portion of its oil to countries such as India and China in the order of 640,000 barrels per day. It is suggested that half of this is to repay debts of US$40 billion, and sending oil to those countries is more beneficial than providing it to small Caribbean and Latin American nations.

Yahoo News reports that China and Venezuela are soon to begin negotiations on the renewal of a US$20 billion credit line and this would further oblige the oil rich nation to send its oil to Asia. It is also said that Venezuela’s oil production is not enough to keep up with these commitments and it might very well yield to the larger markets to the detriment of the smaller ones.

Analysts said that while the changes were expected following the death of its brainchild Hugo Chávez, there are now signs that those changes are actually happening even though it remains unclear which terms may change, said an article on Yahoo News.

Analysts expect that Venezuela will begin to quietly roll out further changes at meetings scheduled in Caracas this week and next month.

In May 2013, Prime Minister Sam Hinds, Guyana’s Ambassador to Venezuela Geoffrey Da Silva, CEO of the Guyana Energy Agency Mahender Sharma and Roopchand Bissessar, Protocol Officer attended the 9th Ministerial Council of PetroCaribe and the 8th Summit of PetroCaribe heads of state.

Officials at that meeting expressed satisfaction so far at the progress made by this integration mechanism and recognised the need to reinvigorate and strengthen the PetroCaribe and ALBA energy cooperation scheme.

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