Thomko Petro Chemical Blog

We've blogged a lot about Venezuela and its state owned oil company Petrocarib.

Several subscribers have asked just how, and when Petrocarib came into being, as well as how does the government owned oil company sell cheap oil when the price is oil is set by OPEC, of which they are a member.

Petrocarib - the Beginning

The start of Petrocarib goes back to early 2003. The Venezuelan government, at a meeting of the Latin American Energy Organization in Ecuador, presented the concept of a political based initiative.

The initiative was based on the rational use of non-renewable energy resources, and to promote the integration and development of the region.

Rather than foster competition, the focus of Petrocarib was marketed as an opportunity for regional solidarity and joint social responsibility. Each participant was promised respect for the particular needs of their country, diversity, sovereignty, and some rather unique "oil payment agreements".

How Does Petrocarib Sell Cheap Oil 

There's been a lot of confusion about "cheap oil " from Venezuela.

Since Venezuela is an OPEC member, it is not allowed to sell below the world market price.

But, Petrocaribe's agreements allow the government owned company to offer "cheap oil " from a creative perspective of loans at concessionary rates, and bartering oil for goods and services. 

1. Loans at Concessionary Rates - These are loan rates offered by Venezuela that are otherwise unavailable for Latin American and Caribbean countries through the International Lending Agencies, or through Capital Markets.

2.  Repayment of Loans for Oil through Goods and Services - Services and products such as sugar, rice, bananas are offered to small countries as a way to repay these loans.

It should also be noted that Venezuela offers to sell oil in Euros as well as US Dollars - a source of contention with Washington.

Venezuela is also adept in the refining, exploration and the distribution of oil, and don't think it stops there - they are also gaining an edge in renewable energy.  

The Department of Energy reports shows that at today's prices Venezuela's oil reserves are bigger than those of the entire Middle East - including Saudi Arabia, the Gulf states, Iran and Iraq.

It is estimated that the Venezuelan government controls 1.3 trillion barrels of oil - more than the entire declared oil reserves of the rest of the planet.