OGJ Oil Diplomacy Editor
LOS ANGELES, Feb. 20 -- Venezuelan President Hugo Chavez and Chinese Vice-President Xi Jinping have signed an agreement to increase to $12 billion an existing bilateral strategic fund for oil development.
According to Chavez, Beijing will contribute $8 billion and Caracas the remaining $4 billion to the fund, which aims largely to increase Venezuelan oil exports to China to 1 million b/d in 2015 from the current 350,000 b/d.
"We will meet that goal, without doubt," Chavez said over national television, while telling the Chinese delegation. "All the oil China needs for the next 200 years, it's here. It's in Venezuela," he said.
Chavez said the agreement with China, part of a strategic alliance, has "no precedent" in his country's history. "Venezuela is ratifying its status as a partner supplying petroleum to China for the next 500 years," he said.
Chavez told Xi that some 30 international oil companies are quantifying the reserves of heavy oil in Venezuela's Orinoco belt, and that some 174 million bbl of crude already had been verified by the end of 2008.
According to the Venezuelan president those reserves amount to about half of the total to be found in the Orinoco belt area, which eventually will make his country "the largest petroleum reserve in the world."
For the moment, though, Chavez said that Venezuela's state-owned Petroleos de Venezuela SA (PDVSA) and China National Petroleum Corp. (CNPC) will add 20,000 b/d of exports by 2012 from four mature fields in northeastern Venezuela.
The fields are Yopales Sur, Oca, Oleos, and Merey in the northeastern Anzoategui state. The possibility for joint studies in the areas was included in a memorandum of understanding signed during Xi's visit to Venezuela.
However, PDVSA said it had yet to reach a final agreement with its Chinese counterparts to set up an oil-shipping joint venture. According to Asdrubal Chavez, a member of the PDVSA board, talks should be completed next month or in April.
Azdrubal Chavez earlier said that that the transportation joint venture, to be known as CV Shipping, would be split equally between the two countries and would focus on shipping crude from Venezuela to China.
On Feb. 13, prior to the agreements signed by Chavez and Xi, CNPC said it has started a new research program that aims to lighten heavy crude oil, enabling it to build several refineries able to process such oil from Venezuela.
The research program may be a key element in Venezuela's desire to ship less of its crude oil to the US and more to China.
Last year, Victor Shum, of Purvin & Gertz, said it would be economic suicide if Venezuela were to significantly shift its crude supply away from the US, as China did not have the capability to refine the highly acidic and high-metal oil.
In its statement on Feb. 13, CNPC acknowledged that the growth of its refining business has been hindered by the fact that Venezuela's heavy crude oil remains one of the most difficult types of oil to refine and that most of CNPC's refineries lack the technology to process it.
CNPC's announcement about the new technology follows a May 2008 agreement between the two countries to establish two joint venture companies: one to develop crude oil from the Junin 4 Block in Venezuela's Orinoco Belt and the other to refine the output in China.
Located south of Venezuela's Guarico, Anzoategui, and Monagas States, the Junin 4 Block is expected to be able to produce 20 million tonnes/year of crude oil, all to be processed by the CNPC refinery.
CNPC hold a 60% stake in the refinery and 40% in the block, while PDVSA holds a 40% stake in the refinery and 60% in the block.
Contact Eric Watkins at email@example.com.