Venezuela's PDVSA and China Sign Series of Energy Deals

The signing of a series of trade agreements which outline bilateral cooperation on a range of issues, including two energy deals, followed talks between Chinese President Hu Jintao and visiting Venezuelan President Hugo Chavez last Thursday. Significant aspects of the deals included agreements which call for China’s National Petroleum Corporation and PDVSA, the state-owned Venezuelan energy company, to jointly develop Venezuelan oilfields. Additionally, Venezuela is expected to increase oil exports to China to at least 300,000 barrels per day before the end of the year. China is also planning to help Venezuela build as many as 18 new oil tankers by 2012. The move will boost Venezuela's shipping capacity to carry crude oil to China.

Other agreements signed last week between the two countries included mining, agriculture and telecommunications deals. Initial investment into Venezuelan infrastructure may be as much as $5 billion. But the energy deals were the cornerstone of the visit to China by Hugo Chavez. China is now the world's second largest oil consumer, trailing only the United States and its growing economy has become increasingly dependent on foreign oil. Venezuela also currently provides about 11% of US petroleum imports, but PDVSA exports to the U.S. fell by 6% in the first quarter of this year. Venezuela and its national oil company PDVSA have embarked upon a course which could eventually divert a significant portion of its energy output to the Far East.

Chavez took the opportunity of his visit to ramp up his rhetoric against the United States and the warming of diplomatic relations between China and Venezuela is being watched with great interest in Washington. As Chavez continues to build alliances with nations unfriendly to the US, while strengthening ties with suppliers Iran and Sudan, he also predicted a sharp increase in Venezuelan oil produced and refined by joint ventures with China in coming years. Venezuela’s Oil Minister also said that China’s investments will allow Venezuela to increase their oil production to almost 6 million barrels per day by 2012.