CNPC Seals Venezuelan Oil Deals

BEIJING (Dow Jones), Apr. 19, 2010

China National Petroleum Corp. confirmed Monday that it has signed several agreements with Venezuela on a long-term credit-for-oil deal and a joint venture to develop Junin 4 oil block in Venezuela.

CNPC said in a statement that it and the China Development Bank signed on Saturday a long-term financing cooperation framework agreement with Venezuela's state-owned Petroleos de Venezuela, also known as PDVSA, the Venezuela Social Development Bank, and the Latin American country's Ministry of Finance and Ministry of Energy and Mines.

The Chinese state-owned oil company said it also signed with PDVSA a crude oil supply contract to guarantee the repayment of a 10-year loan to Venezuela.

Venezuelan President Hugo Chavez said over the weekend that a fresh loan of $20 billion from China Development Bank will be used to build highways and other projects in the country.

CNPC added that its listed unit PetroChina Co. (PTR) signed a memorandum of understanding with PDSVA on cooperation in the Junin 4 block heavy-oil project. The two sides will set up a joint venture to take charge of Junin 4 block project with a 25-year contract term.

The project is expected to produce 2.9 billion metric tons, or 21 billion barrels, of extra-heavy crude oil, it said. PDVSA will control 60% of the project and its Chinese counterpart 40%. The cost of developing the Junin 4 block could reach $16 billion, Venezuelan officials had said.

The Junin 4 project, located within Venezuela's Orinoco heavy oil belt, with total proven oil reserves of 8.7 billion barrels, is expected to have an annual production capacity of 20 million metric tons, or 400,000 barrels per day, CNPC said.

Zhang Guobao, chief of the China Energy Administration, and Venezuelan Oil Minister Rafael Ramirez also signed an intergovernmental agreement regarding Junin 4 block project.

A China Development Bank official declined to provide details, saying there was no information available on the project so far.

Venezuela says it sends some 460,000 barrels a day of crude oil to China, although figures from the Chinese government indicate China only imported an average of 132,000 barrels per day from Venezuela during the first two months of 2010.

Copyright (c) 2010 Dow Jones & Company, Inc.