Venezuela and China boost ties with refinery deal
By Brian Ellsworth
CARACAS, May 10 (Reuters) - Venezuela and China have agreed to build a refinery in China to process Venezuelan oil, advancing leftist President Hugo Chavez's push to boost ties between the OPEC nation and one of the world's fastest-growing energy consumers.
Chavez, a self-styled revolutionary and harsh critic of Washington, has increased energy and commercial ties with China to reduce Venezuela's traditional reliance on energy markets in the United States.
In a ceremony late on Friday, Venezuelan state oil company PDVSA and the largest Chinese oil and gas company PetroChina (0857.HK) agreed to build a 400,000 barrel per day refinery in China's Guandong province.
"Fifteen years ago people said it was impossible to take Venezuelan oil to China because it was too far and the costs made it impossible," Chavez, flanked by Chinese Vice Premier Hui Liangyu, said in a televised address.
"We've destroyed that deception, which came from Washington."
China's deep pockets and its need to ensure future energy supplies, along with Chavez's desire to diversify Venezuela's trade away from the United States, have brought Caracas and Beijing together.
China this year lent $4 billion to Venezuela, which the South American country will repay in fuel, to create an investment fund for development projects such as improvement of rural roads and expansion of fishing.
Chavez has offered unconditional political support to China, describing widespread protests in Tibet as Washington-backed efforts to harm the Beijing Olympics.
The two countries also agreed on Friday to advance agricultural cooperation amid a global food crisis that has sparked riots in poor countries around the world, a problem Chavez blames on global capitalism.
"Our friendship has entered a new era," said Hui.
ENERGY TIES
The joint-venture refinery, Venezuela's first such investment in China, will advance Chavez's goal of shipping to China 1 million barrels per day of oil by around 2011, or 13 percent of current Chinese oil demand.
Venezuela ships nearly 300,000 barrels per day of oil and fuel to China, of which around 80,000 barrels are crude oil.
PetroChina and PDVSA will supply the Guandong refinery with oil produced from the Junin 4 block of the vast Orinoco heavy crude belt, which holds some of the largest oil reserves outside the Middle East.
Venezuela this week said it had increased its estimated total oil reserves by about 30 percent to 130 billion barrels.
Much of this comprises Orinoco oil, which is too heavy to be processed by traditional refineries, but can be turned into more valuable oil when blended with lighter crude or run through four multibillion-dollar heavy oil upgraders.
Chavez last year nationalized the four projects, driving out U.S. oil giants Exxon Mobil (XOM.N) and ConocoPhillips (COP.N) in the process. Both companies are carrying out arbitration proceedings against Venezuela.
Tensions between Venezuela and Exxon, which briefly froze $12 billion in Venezuelan assets as part of the dispute, helped push oil prices toward $100 per barrel in the run-up to the most recent record of $126 per barrel. (Editing by Mohammad Zargham)
