China and Venezuela sign oil accord on sales and investment

China, the world's second-largest energy consumer, signed five energy agreements with Venezuela, paving the way for China to increase gas and oil imports and expand its investment in South America's largest oil producer. China National Petroleum Corp., the parent company of China's largest oil company, will form a venture with state oil company Petroleos de Venezuela to develop and manage 14 oil fields in the Zumano area of the eastern oil state of Anzoategui, Venezuela's energy and mines ministry said.
"China has shown that it's not necessary to trample anyone to be big," Venezuelan President Hugo Chavez said during signing ceremonies at the presidential palace in Caracas. The fields hold reserves of 400 mm barrels of oil and 3 bn cf of natural gas.

Demand for energy is surging in China as the economy expands. The country posted a 9.5 % growth pace in 2004, the fastest in eight years. Chinese demand for oil has more than doubled over the past decade to about 5.55 mm bpd, of which more than half is imported, according to the US Energy Information Administration. The country is now the world's second-largest oil consumer behind the US.
"These agreements involve large investments," the ministry said. The ministry also said the Bank of China may lend up to $ 4 bn to Venezuela for the development of energy and other projects in the country.

The Zumano fields now produce about 25,000 bpd, Petroleos de Venezuela said. Petroleos would hold a majority stake in the new venture. Venezuela will supply China with 100,000 bpd of oil, 3 mm tpy of fuel oil and up to 1.8 mm tons of Orimulsion, an alternate boiler fuel under the agreements, the ministry said.
China National Petroleum will also be allowed to increase natural gas production in the Intercampo Norte and Caracoles oil fields it now manages for Petroleos de Venezuela. Ivan Orellana, Venezuela's governor to the Organization of Petroleum Exporting Countries, said in October that the South American country, the world's fifth-largest oil exporter, is seeking new customers for its oil to reduce its reliance on the US, which accounts for more than 60 % of exports.

Venezuela is exporting about 2.2 mm bpd of oil, according to former managers of the state oil company. To facilitate oil exports to China, Venezuela is studying building new pipelines in either Colombia or Panama, which would take Venezuelan crude to Pacific ports. Large supertankers can't use the Panama Canal.
Chavez has had rocky relations with the US. He was denied a US visa before winning the presidency in 1998 and has accused the US of aiding opponents who have tried to force him from office. The agreements were signed during the visit of Chinese Vice President Zeng Qinghong to the Venezuelan capital, the ministry said.