PdVSA Eyes Central America, Caribbean Expansion In 2008

CARACAS, March 18, 2008 (Dow Jones Newswires)

Venezuela's state oil company will press ahead with plans to increase its presence in Central America and the Caribbean, among other parts of Latin America this year, expanding the reach of President Hugo Chavez's oil diplomacy.

Petroleos de Venezuela SA, or PdVSA, intends to secure new fuel storage and distribution centers in Central America in 2008, as well as begin plans for refineries and even service stations in countries closely allied with the U.S.

In 2008, PdVSA will "place the PDV banner in independent service stations in El Salvador," according to the Oil Ministry's plans for 2008, laid out in its 2007 year-end report obtained by Dow Jones Newswires. Other initiatives in the region include consolidating fuel supply to small transport companies and independent gas stations in Nicaragua, and selling fuel to the agriculture and industrial sectors of Belize.

Chavez's move into Central America gained momentum in December, when the president tried to recruit Guatemala and Honduras into his Petrocaribe initiative, a plan that offers countries oil on a cut-rate payment plan.

The company's plans also call for the lease of port services, transport and a 250,000-barrel-capacity storage facility in Santo Tomas de Castilla, Guatemala.

In Antigua, an island in the West Indies, the company will also seek to lease fuel storage tanks so it can distribute its products to nearby islands such as Dominica, St. Kitts and Nevis, and St. Vincent and the Grenadines.

A large part of the crude imported by countries in the region comes from Venezuela, but is brought in by subsidiaries of large oil companies such as Exxon Mobil Corp., Royal Dutch Shell PLC and Chevron Corp. Enhancing PdVSA's presence in these countries would cut into the business of those companies.

The PdVSA banner would also mean stronger political ties to the Chavez administration. Chavez's anti-U.S. rhetoric has caused concern among some politicians in the region, even as some governments accept Chavez's oil generosity.

In Honduras, divided members of Congress just approved a deal with Chavez's Petrocaribe to purchase 200,000 barrels of crude a day. The country would pay for 60% of the bill in the first 90 days and the rest in 25 years paying a 1% interest rate.

Nicaragua's Daniel Ortega has cemented ties with Chavez, and PdVSA will work this year on a study for the construction of a new refinery, terminals and oil pipelines on Nicaraguan soil, according to the ministry's report.

Other studies planned for this year also include a 10,000 barrel refinery in Dominica, and a 5,000 to 10,000 barrel capacity refinery in Belize, the ministry plan showed. PdVSA would also begin work this year on a further expansion of Cuba's Cienfuegos refinery to 108,000 barrels a day, up from its current 65,000-barrel-a-day capacity.

PdVSA also eyes investments in other countries in the South America. The state-owned company plans the purchase of a terminal in northeast Brazil that can handle 24,000 barrels of crude.

In Ecuador, PdVSA expects to "acquire a plant to mix and package lubricants and an asphalt terminal," according to the report.

Central American countries, especially El Salvador, have strong ties with the U.S., so it remains unclear how successful PdVSA will be in its plans to penetrate that market, among others.

As the price of Venezuelan oil continues to rise along with that of other types of crude, Chavez should have more cash on hand to push his politics further in neighboring countries suffering from more expensive energy bills.

The price for a barrel of Venezuelan oil reached $96.63 a barrel, in line with the record-setting prices of late.

Central American countries in 2006 ran a $7 billion energy bill, a 22% rise from the year before, according to the Economic Commission for Latin America and the Caribbean, or Eclac. Most of the purchases involved diesel and gasoline shipments. In some cases the energy bill has amounted to 12% of Central American countries.

CARACAS, March 18, 2008 (Dow Jones Newswires)