Caribbean Oil Agreement Expected to Provide Cheap Crude for the Region

Cuban leader Fidel Castro, Venezuelan President Hugo Chavez and top officials from fourteen other Caribbean countries met for talks last week on a Venezuelan plan to sell fuel more cheaply to the region at a time when world oil prices remained tenaciously high.

Leaders and officials planned to sign an accord to set up a joint company, as proposed by Mr. Chavez, that would distribute Venezuelan fuel on preferential terms.

"Today I propose to the Caribbean that we form an energy alliance," President Chavez told the visiting delegations, saying the oil plan would be a new force for integration.

The initiative, called PETROCARIBE, could help small Caribbean countries save a projected $6 a barrel on fuel through flexible payments and direct shipping, Venezuelan Foreign Minister Ali Rodriguez said.

The meeting comes as crude prices on the New York Mercantile Exchange fell yesterday on the back of a build in US commercial crude inventories last week. But the benchmark NYMEX crude contract for August delivery was still well above US$57 per barrel.

He said Venezuela´s state-run oil company, Petroleos de Venezuela SA, or PDVSA, will create a Caribbean affiliate that will help distribute fuel to the Caribbean and pull together a "bigger fleet" of Venezuelan tankers for the job. "It doesn´t cost us anything," Mr. Chavez said.

Venezuela, the world´s fifth oil exporter, already has special deals to provide oil on preferential terms to a number of Caribbean countries, as well as nations from Uruguay to China.

Venezuela and Mexico supply subsidized oil to eleven Central American and Caribbean countries under the 1980 San Jose Pact.