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China Lends Venezuela $20 Billion, Secures Oil Supply (Update1)
By Daniel Cancel
April 19 (Bloomberg) -- China will lend Venezuela $20 billion and form a joint venture with a state company to pump crude oil from an Orinoco Belt block, President Hugo Chavez said as he promised to meet the Asian countrys energy needs.
The financing from China is separate from a $12 billion bilateral investment fund, Chavez said, and will pay for Venezuelan development projects. Venezuela currently sends China 460,000 barrels a day of crude oil. The oil is used to repay the Asian country for $8 billion Venezuela used from the fund for infrastructure projects.
We agreed on a huge, long-term financing plan, Chavez said on state television on April 17. This is a larger scope, a super heavy fund. China needs energy security and were here to provide them with all the oil they need.
Venezuela, the largest oil producer in Latin America, is diversifying its export markets and seeking loans from Russia and Japan in a bid to boost oil output and finance social programs. Chavez expects $120 billion of investment to flow into the Orinoco Belt in Eastern Venezuela in the next seven years to increase daily production by as much as 1 million barrels.
State oil company Petroleos de Venezuela SA and China National Petroleum Corp. signed a joint-venture agreement in Caracas that will require a $20 billion investment to pump and refine heavy crude oil at the Junin 4 block of the Orinoco Belt.
Hu Jintao Visit Canceled
PDVSA, as the Venezuelan company is known, will hold a 60 percent stake in the block that is expected to eventually produce 400,000 barrels a day, Oil Minister Rafael Ramirez said on April 16. CNPC will have to pay the Venezuelan government as much as $1 billion to access the reserves, he said.
A Chinese delegation led by Zhang Guobao, head of the Chinese National Energy Administration, attended the signing ceremony in Caracas after President Hu Jintao canceled a planned visit to Venezuela and Chile following an earthquake that killed more than 1,400 people in Chinas Qinghai province. Hu is expected to reschedule his trip.
The two countries plan to build three electric plants powered by petroleum coke with a capacity of 300 megawatts each, Chavez said. Another thermoelectric plant will be built in Merida state to produce 500 megawatts, he said.
Venezuela is grappling with a severe electricity crisis following a drought that dried up reservoirs behind hydroelectric plants. The country plans to spend $6 billion this year to boost thermoelectric output.
Trade Surges
Trade between the two countries surged to $8.9 billion in 2008 from $85.5 million in 1999, according to Venezuelas state bank, Bancoex.
Chavez said that the $20 billion loan is the largest that China Development Bank Corp. has extended to a country, and will go toward funding housing, railroad, energy and agriculture projects. China built and launched Venezuelas first satellite into orbit in 2008.
China last year agreed to loan Brazils state-controlled oil company, Petroleo Brasileiro SA, or Petrobras, as the company is known, $10 billion last year, and signed a long-term supply contract with the company.
The relations between China and Venezuela extend from below the surface of the earth to outer space, Chavez said. Were producing oil together and our satellite is out there in space. This is a mutating world in transition.
--Editors: John Chacko, Mike Millard.
China Lends Venezuela $20 Billion, Secures Oil Supply
By Daniel Cancel
April 19 (Bloomberg) -- China will lend Venezuela $20 billion and form a joint venture with a state company to pump crude oil from an Orinoco Belt block, President Hugo Chavez said as he promised to meet the Asian countrys energy needs.
The financing from China is separate from a $12 billion bilateral investment fund, Chavez said, and will pay for Venezuelan development projects. Venezuela currently sends China 460,000 barrels a day of crude oil. The oil is used to repay the Asian country for $8 billion Venezuela used from the fund for infrastructure projects.
We agreed on a huge, long-term financing plan, Chavez said on state television on April 17. This is a larger scope, a super heavy fund. China needs energy security and were here to provide them with all the oil they need.
Venezuela, the largest oil producer in Latin America, is diversifying its export markets and seeking loans from Russia and Japan in a bid to boost oil output and finance social programs. Chavez expects $120 billion of investment to flow into the Orinoco Belt in Eastern Venezuela in the next seven years to increase daily production by as much as 1 million barrels.
State oil company Petroleos de Venezuela SA and China National Petroleum Corp. signed a joint-venture agreement in Caracas that will require a $20 billion investment to pump and refine heavy crude oil at the Junin 4 block of the Orinoco Belt.
Hu Jintao Visit Canceled
PDVSA, as the Venezuelan company is known, will hold a 60 percent stake in the block that is expected to eventually produce 400,000 barrels a day, Oil Minister Rafael Ramirez said on April 16. CNPC will have to pay the Venezuelan government as much as $1 billion to access the reserves, he said.
A Chinese delegation led by Zhang Guobao, head of the Chinese National Energy Administration, attended the signing ceremony in Caracas after President Hu Jintao canceled a planned visit to Venezuela and Chile following an earthquake that killed more than 1,400 people in Chinas Qinghai province. Hu is expected to reschedule his trip.
The two countries plan to build three electric plants powered by petroleum coke with a capacity of 300 megawatts each, Chavez said. Another thermoelectric plant will be built in Merida state to produce 500 megawatts, he said.
Venezuela is grappling with a severe electricity crisis following a drought that dried up reservoirs behind hydroelectric plants. The country plans to spend $6 billion this year to boost thermoelectric output.
Trade Surges
Trade between the two countries surged to $8.9 billion in 2008 from $85.5 million in 1999, according to Venezuelas state bank, Bancoex.
Chavez said that the $20 billion loan is the largest that China Development Bank Corp. has extended to a country, and will go toward funding housing, railroad, energy and agriculture projects. China built and launched Venezuelas first satellite into orbit in 2008.
China last year agreed to loan Brazils state-controlled oil company, Petroleo Brasileiro SA, or Petrobras, as the company is known, $10 billion last year, and signed a long-term supply contract with the company.
The relations between China and Venezuela extend from below the surface of the earth to outer space, Chavez said. Were producing oil together and our satellite is out there in space. This is a mutating world in transition.
--Editors: John Chacko, Mike Millard.
China Lends Venezuela $20 Billion, Secures Oil Supply