Chavez “Oils” Venezuela’s Ties with China, But At A Cost

Via Stratfor (subscription required), very interesting analysis of PetroChina’s deal with Venezuelan oil company Petroleos de Venezuela to build a 400,000 barrels per day refinery in China’s Guangdong province designed to process Venezuelan bitumen oil (extremely heavy, sour oil) into orimulsion, a fuel developed and patented by PDVSA. The deal allows Venezuelan President Hugo Chavez to increase political and economic ties to China, but undervalues the oil it will export and puts pressure on an already overburdened Petroleos de Venezuela.  As the article notes, the the allure of this deal is locked into Chavez’s:

“…policy of finding political and trade alternatives to the United States. Chavez has prioritized the shift of Venezuelan energy exports away from the United States, Venezuela’s biggest trading partner, as a way of asserting Venezuelan independence.  [But] the downside is that Chavez is selling a significant chunk of Venezuela’s yearly exports at a cut rate, putting pressure on an overburdened and underequipped PDVSA. With PDVSA subsidizing the Venezuelan government’s populist policies, even though oil prices have spiked at more than $120 per barrel the oil company might be unable to devote the funds necessary to boost flagging production.”



This entry was posted on Wednesday, May 7th, 2008 at 12:07 pm and is filed under China, China National Petroleum Corporation, Petrochina, Petróleos de Venezuela, Venezuela.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

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