Chinese back on Venezuela scene

by Hongwei Shang on January 18, 2008

in News

4 January 2008

Deal between giants CNPC and PDVSA set to be revived

Venezuelan President Hugo Chavez is expected to revive a major oil deal with China in his upcoming visit to the Asian powerhouse this month.

The deal will call for China National Petroleum Corporation (CNPC) to expand operations at Venezuela’s MPE-3 oilfield, as well as build pipelines and terminals to move about 600,000 barrels per day of heavy oil to China by 2013.

"It is an integrated project involving multi-billion US dollars," people familiar with the deal told Upstream.

They added that Venezuela is keen for China to build the infrastructure, which was not included in the earlier agreement.

The deal has also prompted CNPC to proceed with the building of three refineries in southern China, including one in Shenzhen city and one in Huizhou city, both in Guangdong province, to process the heavy oil.

The country has also signed a memorandum of understanding with a Chinese shipyard to build very large crude carriers to move the fuel to China.

Venezuela said earlier that it will boost oil supplies to China to 1 million bpd by 2012, up from the 500,000 bpd expected in 2010. The current volume is 250,000 bpd.

It was announced in late 2006 that Venezuela would end production of the country’s unprocessed heavy oil because it was "too cheap", said one source.

PDVSA has decided not to make any new investments in the expansion of that business and only to honour existing contracts, such as the one signed with CNPC.

However, as the crude price hovers around $100 per barrel, Venezuela is said to be ready to sell more of the heavy oil at a much higher price.
CNPC first signed the deal with PDVSA to develop MPE-3 in 2001. The company then built a refinery in Venezuela with a capacity of 6.5 million tonnes per year.

Since then, under Venezuela’s nationalisation plans, all the oil contracts PDVSA signed with foreign companies need to be reviewed and re-signed.

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