PetroCaribe is an Energy Cooperation Agreement initiated by the Government of Venezuela to provide a preferential payment arrangement for petroleum and petroleum products to some Caribbean and Latin American countries. This organization was established on June 29, 2005, when the Energy Cooperation Agreement was signed by 14 Caribbean countries during the First Energy Summit of Caribbean Heads of Government held in the city of Puerto La Cruz, in eastern Venezuela.
The payment system allows for participating nations to buy oil on market value with only a portion paid for upfront and the remainder to be paid through a 25 year financing agreement on 1% interest. A portion of the value of imports of crude oil from Venezuela is paid according to a sliding scale:
- Financing scale - between 5% and 50% of the oil bill, using current hydrocarbon prices as a reference.
- Interest rate to 1% if oil price tops US$40 per barrel.
- Short-term payment of 60% of the bill is extended from 30 days to 90 days.
- The grace period 1-2 years, with a payment period from 17- 25 years.
Under the arrangement, the participating countries purchase up to 185,000 barrels (29,400 m3) of oil per day on these terms. PetroCaribe has been hailed as the most extensive and encompassing scheme ever designed to meet the energy price woes of CARICOM countries.
PetroCaribe also provides cooperation support for efficient use of energy, technological cooperation, training, the development of energy infrastructure, and the promotion and use of alternative energy sources, such as wind, and solar energy, among others.
In 2005, all CARICOM countries, except Trinidad & Tobago and Barbados, signed on to the PetroCaribe framework agreement. The PetroCaribe Arrangement is implemented as a series of Bilateral Agreements between Venezuela and participating countries, therefore the CARICOM Secretariat is not represented at the Meetings, etc.