Venezuela and TT oil prices not in competition -Finance Minister

Last Updated on Tuesday, 1 September 2015, 18:52 by GxMedia

As Guyana looks to Trinidad and Tobago (TT) to buy all of its fuel, Minister of Finance, Winston Jordan says Guyana is not losing out given the perceived “attractive” PetroCaribe oil-for –rice deal which Guyana has with Venezuela.

But Opposition Leader, Bharrat Jagdeo says Guyana has lost out on an alternative to cash payment for rice sales to its western neighbour. “If that’s the case, it means the PetroCaribe redit facility will disappear, it will mean further pressure at this point on time on our balance of payments and the PetroCaribe proceeds which used to finance the rice purchase will no longer be there so even if Venezuela were to decide that they want to resume the importation of rice, there will be no means of financing that through the PetroCaribe arrangement unless Venezuela decides to pay in cash immediately,” said Jagdeo who is a former Finance Minister.

The PetroCaribe agreement kicks only if the world price for oil exceeds US$40 per barrel. Due to a decline in China’s manufacturing and a cutback in US oil production, the price stood at about US$45.41 per barrel on Tuesday.

Jordan told Demerara Waves Tuesday September 1 that the difference with the two providers is that while 100 percent payment will be required for TT, the payment process is only delayed when it comes to purchasing fuel from Venezuela.

The minister was responding to questions about the competitiveness of fuel prices between the two countries when he said, “there is really no difference between the two.” He explained that the method of payment with Venezuela is that a “special mechanism used for payments is done. There is no lower price or special price; what we have is a special arrangement in place which just delays the payment time.”

“With Trinidad now,” he continued, “We will have to pay them 100 percent of the fuel cost upfront.” Jordan indicated that the PetroCaribe, while providing breathing space in fuel payments, “really means almost nothing, particularly when fuel prices are low, because you pay almost all the cost upfront.”

He said for example, currently, fuel prices are very low and should Guyana buy fuel from Venezuela it would almost be like purchasing from an ordinary supplier.

Demerara Waves understands that fuel prices would depend on international fuel cost -which has been falling for months now. The PetroCaribe deal initiative came under the previous government. Several Caribbean member states, including Guyana, purchase oil on conditions of preferential payment.

The initiative was launched in June 2005 and the payment system allows for purchase of oil at market value for 5%-50% up front, with a grace period of one to two years. The remainder can be paid through a 17-25 year financing agreement with 1% interest if oil prices are above US$40 per barrel.

It was recently reported that Guyana has gone back to TT being their biggest fuel provider now that fuel has not been received from Venezuela in the last two months. Many have attributed this to Guyana’s fall out with its Spanish-speaking neighbour that has aggressively claimed a significant part of the country.

Jordan said that Guyana cannot wait until it is too late to ensure its sources for such a vital commodity as fuel. TT previously provided Guyana with much of its fuel until it branched off into the PetroCaribe deal where half of the countries daily fuel needs was coming from.