CARACAS, Sept 25 (Reuters) - A $5 billion loan that Venezuelan state oil company PDVSA negotiated with China will be available by year-end, but the funds will go directly to contractors rather than into company coffers, a senior PDVSA source told Reuters on Friday.
President Nicolas Maduro announced the loan during a trip to Beijing in September, saying the funds would be put toward boosting oil production.
“The money will begin flowing at the end of this year,” said the source, who asked not to be identified. “(It) will be paid directly to the companies that execute the projects.”
Venezuela has received $50 billion in financing from China through an arrangement created in 2007 under which the South American nation repays loans in shipments of crude and fuel.
Maduro’s government has in the past used Chinese financing to bolster flagging international reserves, which have steadily weakened since last year on the oil market rout.
The source said PDVSA is planning its 2016 operations with the expectation that oil prices will bounce back above $50 per barrel.
“Next year will be a less difficult year than this one in terms of prices,” said the source, estimating that the country’s crude will sell at a price “above $50 per barrel.”
Venezuela’s basket of crude and refined products closed the week at $40.51, the petroleum ministry said on Friday.
With prices at current levels, PDVSA has struggled to pay providers, meet budget targets, and pay for imports, according to industry analysts.
But the company is prepared to pay down $3.4 billion in bonds that mature in late October and early November, the source said. He confirmed that the government has bought back a portion of the outstanding debt, without saying how much.
“We are going to pay, as we always have,” he said, adding that the expected increase in oil prices will help the company pay off some $3 billion in bonds that come due in 2016.
PDVSA also expects in the coming months to reduce its debts with oil services companies, which have grown this year as a result of lower revenue.
“After (the debt payments), there will be more room to pay providers,” he said. (Writing by Brian Ellsworth; Editing by Andrew Hay)