Oil deal gets $28b China loan

CARACAS - Venezuela secured a US$20 billion loan from China and agreed to form a joint venture to pump crude oil from a block in the Orinoco Belt, President Hugo Chavez said as he promised to meet the Asian country's energy needs.

Chavez said the US$20 billion ($28 billion) financing from China is separate from a US$12 billion bilateral investment fund, without providing details. Venezuela sends China 460,000 barrels a day of crude oil to repay an US$8 billion loan that finances infrastructure projects in the South American country.

"We agreed on a huge long-term financing plan," Chavez said. "This is a larger scope, a super heavy fund. China needs energy security and we're here to provide them with all the oil they need."

Venezuela is diversifying its export markets and seeking loans from Russia to Japan in a bid to boost oil output and finance social programmes. Chavez expects US$120 billion of investment to flow into Eastern Venezuela in the next seven years to add more than one million barrels a day of new production.

Venezuela state oil company Petroleos de Venezuela and China National Petroleum signed a joint-venture agreement in Caracas that will require a US$20 billion investment to pump and refine heavy crude oil at the Junin 4 block of the Orinoco Belt.

PDVSA, as the company is known, will hold a 60 per cent stake in the block expected to eventually produce 400,000 barrels a day, Oil Minister Rafael Ramirez said last week. CNPC will have to pay the Venezuelan government as much as US$1 billion to access the reserves, he said.

The two countries plan to build three electric plants powered by petroleum coke and a thermoelectric plant.

- BLOOMBERG