With global crude prices falling and their biggest oil supplier — PetroCaribe — on life support amid Venezuela’s tough economic times, Caribbean leaders will participate in closed talks Monday in Washington with Vice President Joe Biden and other U.S. officials at the first Caribbean Energy Summit.
The summit comes as both the United States and Trinidad and Tobago seek to help the Caribbean, where concerns are increasingly growing over the high cost of diesel-fueled electricity and the effect of Venezuela’s economic woes on the PetroCaribe deferred oil payment program. The arrangement allows regional governments to receive oil at a discount and invest the savings on social and infrastructure programs.
In Jamaica, for instance, the savings is about $500 million a year and has helped the country remain afloat during its recent financial crisis. In Haiti, it’s about $400 million and has gone into rebuilding after the country’s devastating Jan. 12, 2010, earthquake, as well as the government’s free meals social program.
For months, however, Venezuela has been cutting oil exports to some of its 13 beneficiaries, leaving governments in a panic. While Haiti says it hasn’t suffered any, private companies have had to order additional fuel on the spot market. Haiti subsidizes its state-owned electricity company, EDH, to the tune of about $200 million a year.
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“It is a must for us to work on the energy sector,” said President Michel Martelly. “When you talk about attracting investors, when we are talking about energy, we cannot do this without energy. And it has been hard for us to change the system here.”
Martelly conceded that energy is one area where he has not succeeded, and has acknowledged Haiti’s vulnerabilty given its dependence on PetroCaribe at a time when Venezuela is having difficulties.
“PetroCaribe is not dead, but it’s on life support; even Cuba has looked for alternatives beyond Venezuela,” said Eric Farnsworth, vice president of the Council of the Americas and Americas Society, which is co-hosting the energy summit.
Farnsworth said the summit is a well-timed initiative and highly relevant initiative.
“There are several things going on here. The first is the Caribbean’s desire to diversify their energy sources away from increasingly troubled Venezuela, while also working to improve their clean energy profile and reducing costs of electricity in order to promote greater economic competitiveness,” Farnsworth said. “All three of these goals could be addressed effectively by closer energy relations with the United States, particularly as the U.S. looks increasingly to export cleaner natural gas.”
Liquefied natural gas, or LNG, Farnsworth said, is cleaner than the current fuel most Caribbean nations get from Venezuela, and cheaper due to new technologies and increased production in the United States.
“What’s lacking, for the most part, is private investment to develop the regional energy market,” he said.
This is where the U.S. can help, experts say. In recent months, Biden and Secretary of State John Kerry have been talking about the energy crisis in the Caribbean in visits to the region. In June, Biden launched the Caribbean Energy Security Initiative (CESI), aimed at expanding U.S. leadership and collaboration in helping improve competitiveness in the Caribbean by addressing the market issues and other distortions that have affected energy distribution.
In December, Kerry addressed the importance of energy security while attending the 20th anniversary of the Summit of the Americas.
“The solution to climate change is energy policy,” Kerry said. “Just as climate change presents the United States, Latin America and the Caribbean with a common threat, the need to develop secure, sustainable sources of energy represents a remarkable shared opportunity.”
Building a new clean energy revolution for the world, Kerry said, requires countries to make “some very fundamental choices.”
Anthony Bryan, an expert on security issues in the Caribbean and Central America, says the United States’ interest coincides with its resurgence as a major oil and gas producer.
“Given the boom in natural gas and progress on exports, the U.S. could and should do more to help lower energy costs in the region by helping countries to convert to LNG,” said Anthony Bryan, a Caribbean energy expert and senior fellow at the Institute of International Relations at the University of the West Indies at St. Augustine, Trinidad.
“U.S. government-backed export financing structures to enable LNG exports to markets that have credit ratings below investment grade would be a step forward,” he said. “The U.S. has a lot to gain from this, in ensuring the region’s energy security and in providing another, though small, platform for its oil and gas exports. It can be a player, together with T&T and Venezuela in the energy saga.”
From the Caribbean’s point of view, Bryan said, the summit is taking place as oil-producing Trinidad and Tobago, a global LNG player, commits to supporting the energy needs of its neighbors.
“T&T is not interested in replacing PetroCaribe but in being part of the solution to a weakening PetroCaribe,” he said, adding that Trinidad plans to enter into an agreement with the Inter-American Development Bank to become the lead player in helping to resolve the region’s energy challenges.
As for Monday’s gathering, Bryan and Farnsworth say it’s an opportunity for the U.S. to show it intends to be a long-term partner in Caribbean energy security.
“There are some real opportunities here for international investors and for U.S. energy policy,” Bryan said.