CARACAS Venezuela said it would tap $2.2 billion from a Chinese credit line to boost oil output at joint ventures with China National Petroleum Corp, in a boost for the South American country's struggling oil industry and a show of unity with a key ally.
CNPC, China's largest state energy group, and Venezuela's state oil company PDVSA [PDVSA.UL] will seek to boost production in the OPEC country by around 277,000 barrels per day, President Nicolas Maduro said in a televised address.
Funds will come from a credit line of up to $9 billion with China, Maduro said after a meeting with CNPC in Caracas on Thursday.
The agreement will be a boon to Venezuela's oil industry, which has seen its production tumble this year amid a steep recession. It is also welcome public backing for Maduro from a strategic ally amid a political and economic crisis.
"Many thanks for all the support you have given Venezuela in 2014, 2015, and especially 2016," Maduro said in a televised speech. "Our older sister China has not left Venezuela alone in moments of difficulty."
Venezuela has borrowed over $50 billion from China under a financing arrangement created by late socialist leader Hugo Chavez in 2007, in which a portion of its crude and fuel sales to the world's second-biggest economy are used to pay down loans.
The increased oil output at the joint ventures would boost shipments to China to over 800,000 bpd, the president said.
Venezuela is undergoing a brutal recession due to a collapsing state-led economy, made worse by the tumble in oil prices. The rout in oil markets has also left Maduro's government struggling to meet the original terms of the oil-for-loans agreement, which require that PDVSA set aside more barrels for debt services when prices fall.
CNPC has minority stakes in oil joint ventures with Caracas-based PDVSA, which oversees the world's biggest oil reserves but has seen output fall amid the country's cash crunch, low investment, and debts with service providers.
Output increases are planned at the Petrourica, Petrozumano, and Sinovensa joint ventures, Maduro said. A deal was also reached to rehabilitate 500 light crude wells with a potential of some 42,800 bpd.
Oil Minister and PDVSA president Eulogio Del Pino said the projects would be rolled out in coming months.
It was not immediately clear if China would free up more oil funds via the credit line.
(Reporting by Alexandra Ulmer; Additional reporting by Diego Ore; Editing by Andrew Hay and Lisa Shumaker)