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| Caribbean-Latin America | |||
| Venezuelan oil a risky investment for China | |||
| 2012-03-14 | |||
BUENOS AIRES — China has poured billions of dollars into Venezuela's oil sector to expand its claim over the country's massive oil reserves. But Beijing is getting relatively little for its investments, and Chinese officials are increasingly frustrated with Venezuelan President Hugo Chavez, according to energy analysts and former managers of the state oil company, Petroleum of Venezuela, or PDVSA as it's known by its Spanish acronym.
PDVSA claims to send 410,000 barrels a day to Chinese markets, the bulk of which is used to pay back the loans. Already this year, PDVSA has announced that Citic Group Corp., China's largest state-owned investment company, will acquire a 10 percent stake in the Petropiar heavy-crude project held with PDVSA and U.S.-based Chevron Corp. It also said that the China Development Bank will spend $4 billion to help boost production in a joint venture with China National Petroleum Corp., or CNPC. The Chinese bank and the Venezuelan government also have agreed to renew a $6 billion bilateral investment fund, of which $2 billion will help boost PDVSA production. But Tom O'Donnell, an oil analyst who teaches at the New School University and writes an oil-industry blog, the Global Barrel, said the payoffs of China's loans amount to a "consolation prize." He said China's goal is not to get oil for loans, but to have its own national oil companies contract for major oil-production projects in Venezuela's Orinoco Tar Sands, the largest single known petroleum reserve in the world, with 513 billion barrels of heavy crude oil. "The Chinese have not gotten the kind of preferential access they want [to the tar sands], and my sources tell me they are extremely unhappy," said Mr. O'Donnell. In 2010, CNPC signed a deal to help Venezuela develop a major Orinoco oil field known as Junin 4, which includes the construction of a facility to convert heavy oil to a lighter crude that could be shipped to a refinery in Guangdong, China. "Although the contract was signed in December 2010, not one barrel of oil has yet been produced, much less upgraded," said Gustavo Coronel, a former PDVSA board member.
"Apart from money, there seems to be little that China can offer Venezuela in the oil industry," he said, adding that a "culture gap will make working with China very difficult for Venezuelan oil people, who were mostly trained in the U.S."
"If all that happens, China will be in a position to take substantial volumes of Venezuelan oil," she said. "The problem is that the project hasn't gotten off the ground." Ms. Downs said Venezuela is far from living up to Mr. Chavez's export goals for Beijing and that PDVSA's claims of sending 410,000 barrels a day do not match Chinese customs data, which show 322,000 barrels per day of crude and fuel oil imported from Venezuela last year. "Although Venezuela's oil exports to China have grown along with the volume of oil-backed loans extended by China Development Bank to Caracas, the delivered volumes still fall short of Chavez's goal of eventually shipping 1 million barrels per day to China," she said. Critics of the loans say Mr. Chavez is using the so-called "China fund" as his personal piggy bank. The Chinese also seem to be increasingly wary. Internal PDVSA documents released by a Venezuelan congressman show that the Chinese balked at a $110 billion loan request by Mr. Chavez in 2010, after PDVSA officials failed to account fully for where the money would go. The Chinese are now pressing PDVSA to let them list some of their investments in the Orinoco region on the Hong Kong exchange, a move analysts say would increase transparency and accountability in PDVSA's spending. "Development of the Orinoco oil belt is only slowly taking place because most of the companies — excluding Chevron, Repsol and China National Offshore Oil Corp. — either do not have the cash or the technology," said Oliver L. Campbell, a former finance coordinator at PDVSA. Unlike light and sweet crude from Saudi Arabia, oil from Orinoco is tarlike. It is laced with metals and sits beneath deep jungles. Getting to the oil field means building roads, electrical-power grids and other major infrastructure. Once the oil is extracted from the ground, it is technically difficult to process. "One of the major problems is that there are very few refineries outside the Gulf of Mexico that can handle Venezuelan crude," said Jorge Pinon, a former president of Amoco Oil Latin America. Years ago, U.S. companies such as Shell and Exxon invested heavily in U.S. Gulf Coast refineries capable of processing heavy crude after they saw that the world's supplies of sweet crude were diminishing, Mr. Pinon said. "The Chinese don't have that kind of capacity," he said. But they are looking to get it by investing in oil infrastructure off Venezuela's Caribbean coast. CNPC, for example, has extended a line of credit to Cuba to upgrade a Soviet-built facility jointly owned by Venezuela and Cuba. The company PetroChina also has taken over Saudi Aramco's lease on a massive oil-storage facility at the strategically located Statia terminal on the Dutch Caribbean island of St. Eustatius. PetroChina also has tried to buy an oil refinery on the island of Aruba owned by Texas-based Valero Energy Corp., according to news reports. Luis Giusti, a former president of PDVSA, said the Chinese market becomes even more relevant for Venezuela in the face of a projected resurgence of domestic production in the United States, which currently buys about 45 percent of all Venezuelan crude exports. "The U.S. Energy Information Agency has estimated that the U.S. could reach a production of 20 million barrels per day by 2035, coming from shale oil in North Dakota, Arkansas, Oklahoma, Montana and others," he said in an email. "This would force exports from South America to look for other markets." | |||
| Posted by:Steve White |
| #4 The Chinese get screwed, and Venezuela keeps the money and produces nothing? Boy howdy, that isn't likely to last. Do you seriously think the skinflint Mandarins are going to just let this pass. Man, look for bank trnasfers by hackers in Guangzhou PLA unit to start bringing the money back out of the private bank accounts all across Venezuela, plus, nasty accidents and not so subtle injuries. The history of lending by the Chinese is not full of Wesern style shoulder shrugs. Cultures don't change that much, and the Chinese are still just klike they were, just more technologically capable and with a very thin coat of civilized behavior painted on for show. Think I'm wrong, see how the west fares in Chinese courts about anything. |
| Posted by: NoMoreBS 2012-03-14 14:09 |
| #3 Does anyone know how much oil and gas is available for development IN China? It seems new fields are showing up everywhere. |
| Posted by: tipover 2012-03-14 10:38 |
| #2 China has poured billions of dollars Trillions left. |
| Posted by: g(r)omgoru 2012-03-14 04:20 |
| #1 Oh, this is a great one. Investment goes in but nothing comes out. It's like the Chinese know what it's like to invest in China. The real reason China does this is because it has no better alternatives. The rest of the world has everything locked up, and Venezuela is one of the few places with a friendly dictator willing to do business. |
| Posted by: gromky 2012-03-14 02:50 |