PetroChina’s New Venezuela Oil JV

PetroChina has signed a 40-60 joint venture agreement with Venezuela’s state oil company PDVSA to develop the Junin 4 block in the Orinoco belt, the massive offshore field that has proven oil reserves of 8.7 billion barrels. The goal is to extract  2.9 billion barrels of crude over the 25-year term of the JV. In parallel, China Development Bank will make $20 billion of soft loans to Venezuela secured against oil sales from the JV, part of the broader oil-for-loans accord between the two countries struck last year similar to those Beijing has with Russia, Kazakhstan and Brazil.

Venezuela President Hugo Chavez said at the weekend that $16 billion of Chinese investment will help develop not only Junin 4, but also a 500MW thermal plant in Merida state to be built by CAMC Engineering, while the soft loans will be used to build housing, roads and three 300MW power generation plants to alleviate Venezuela’s electrical power shortages.

Venezuela has become Beijing’s fifth largest trading partner in the region with bilateral trade toping $7 billion last year. Venezuela now exports 460,000 barrels of oil a day to China, up from 200,000 barrels in 2006, and the oil-for-loans accord sees that rising to 1 million barrels a day eventually.

Chavez was hoping to tout all this while playing host to President Hu Jintao, but Hu cut short a visit to South America to return to China to visit victims of the Qinghai earthquake.

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