Thomko Petro Chemical Blog

Trinidad's New Energy Minister, Lenny Saith, said he expects, "plenty bids, plenty money", as the island launched a new bidding round for oil and gas exploration and production contracts along the north and east coasts of Trinidad and Tobago. 

Trinidad and Tobago whose approximately 150,000 barrel-per-day oil industry and major refining capacity has made the island quite wealthy, along with being the prime regional supplier to their Caribbean neighbors.

The supplier relationship recently changed when Hugo Chavez made Trinidad's island neighbors a better offer through Petro Caribe.

Chavez proposed an innovative approach which allows the islands to defer part of the payment by paying a percentage of the market price, with the remaining cost converted into long term, low interest loans.

When the market prices rise above $50 per gallon, a 40% discount is given, along with a 25 year, 1% interest loan. If prices rise above $100, the discount rises to 50%.  

The Trinidad oil industry is closed tied to U.S. oil operations, and that makes the option for discounting oil prices to it's island neighbors limited. Trinidad has always hesitated to extend discounts to the less fortunate neighbor islands, and this is the driving factor behind 13 of the 15 Caribbean islands that have already signed with Petro Caribe.

Chavez has even developed a program where the oil debt can be partially amortized by means of paying in goods and services.

Venezuela has an existing arrangement with Cuba. The program is called "doctors for oil", and Cuba sends a minimum of 10,000 doctors, nurses and dentists to provide free health care  for Venezuela's poorest communities. This exchange provides Cuba with 90,000 barrels of Venezuelan oil per day.

There's one catch!

PetroCaribe will only deal with a state controlled entity, meaning that the agreement is based on eliminating all intermediaries. This means that existing U.S. area distributors, Shell and Texaco, would be excluded from the purchase of subsidized Venezuelan oil.

Trinidad and Barbados both have complaints with the Petro Caribe agreement. From their point of view, the islands are in jeopardy of locking themselves into a sole provider with possible future consequences. And it has not gone unnoticed that both islands are closely tied to the U.S.

Trinidad has gone as far as to warn the region that if they walk away from their oil agreements, Trinidad will look elsewhere for customers. To further add fuel to the fire, the Prime Minister has stated that the islands will not be able to count on getting any future oil supply from them, and the Caribbean will be "cutting their own throats".