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Venezuela – Dominican oil pact reaches operational demise

Santo Domingo.- Petrocaribe, the energy cooperation agreement conceived by Venezuela under the presidency of Hugo Chávez, has reached an operational end for the Dominican Republic.

The credit conditions in the pact, which as of 2014 was one of the main financing supports for the country’s  budget, ceased to function operationally, once oil prices began to decline from the span on which it was activated and by the advance purchase made by the Dominican government of the debt generated by the facility.

The agreement’s other important component, the guaranteed supply of oil and oil products, has been waning, trimming its share to less than 10% of its potential during 2016.

Origin

Petrocaribe was created June 29, 2005, by Hugo Chávez as an energy cooperation mechanism for some 14 non-oil producing countries in the region.

The Dominican Republic was one of the largest beneficiaries in terms of fuel supply and financing, with up to 55,000 barrels daily, with financing of 1 to 50% of the cost of each fuel delivered. The grace period of the financed amount is two years, and the repayment period was 17 to 25 years, with 1% interest.

In practice, Petrocaribe is ending for the Dominican Republic, similar to the Mexico-Venezuela San José Agreement signed August 3, 1980, in which beneficiary countries, including the Dominican Republic – secured a supply of up to 160,000 barrels per day of oil.

That volume would be contributed equally by Mexico and Venezuela. But in practice Mexico has never fulfilled its side of the agreement the, of 80,000 barrels per day to supply the Dominican Republic.

In fact, when Chavez designed Petrocaribe, it left the San José agreement without a reason for being, since it offered fewer advantages.

For the Dominican Republic the new formula was a boon, since it covered the periods of highest jumps in oil prices.

From its inception it became a major credit window. It started with US$165 million in 2005 to more than US$4 billion by year end 2014. In January 2015, the government bought 98% of the Petrocaribe debt, with a discount of 52% of the value.

Venezuela discarded as supplier during 2017

Venezuela hasn’t shipped oil or oil products to the Dominican Oil Refinery since September, reducing its contribution to the Petrocaribe agreement to 8.5% of the volume it was required to supply, said Refinery CEO Félix Jiménez.

Faced with the situation and the uncertainty it represents, the head of Refidomsa doesn’t list Venezuela as a committed supplier for next year.

Source: DT

Dec 23, 2016

Category: DR News |

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Last updated March 29, 2017 at 11:04 PM
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