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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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China Throws Venezuela’s Oil Industry A $5B Lifeline

China’s Development Bank has approved a US$5-billion loan for Venezuela’s oil industry, Bloomberg reports, quoting the troubled South American country’s Finance Minister Simon Zerpa.

“We’ve received the authorization for a direct investment of more than $250 million from China Development Bank to increase PDVSA production, and we’re already putting together financing for a special loan that China’s government is granting Venezuela for $5 billion for direct investments in production,” the official said.

The loan is literally a lifeline for PDVSA, which has been unable to stop an accelerating production decline resulting from years of mismanagement and a cash crunch brought about by the tightening grip of U.S. sanctions.

International Energy Agency figures suggest Venezuela produced an average 1.36 million barrels of oil daily last month. This is down from 2.9 million bpd five years ago. President Maduro vowed to increase production by 1 million bpd by the end of the year, but he admitted that the goal would be difficult to meet.

It became even more difficult after ConocoPhillips seized PDVSA storage facilities in the Caribbean, keeping it from meeting its export obligations and creating tanker bottlenecks at Venezuelan ports.

PDVSA’s exports to China also suffered as a result of the quickly deteriorating situation. Shipping data from Reuters last month suggested that these could have plummeted to an eight-year low. This would have provided additional motivation to China to lend Venezuela a hand with growing its oil production. Related: Saudi Arabia Won’t Bring 2 Million Bpd Online

As a major creditor and ally, China is sure to benefit from some preferential oil export conditions amid rising international prices that would ensure its continued backing of Caracas.

“One of the best things about Venezuelan oil was its stable volumes for all these years and competitive prices,” a senior Chinese oil industry official with direct knowledge of the Venezuelan supply issues told Reuters last month. “But now they seem in very bad shape, not having the money to upgrade port facilities, no money even to remove the high water content in crude oil.”

By Irina Slav for Oilprice.com

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  • petergrt on July 04 2018 said:
    How long before the Chinese and Russian 'communist' oligarchs will own most of Venezuela's oil assets?

    Better still, how long will the people put up being without tortillas . . ?
  • Ivan on July 04 2018 said:
    Petergrt, for your information, Venezuelans dont eat or know what tortillas are. That is an item eaten mainly in Mexico, some Central American countries and Texas, California, Arizona, New Mexico mainly amongst other states. Just so you know.
  • Prsnep on July 04 2018 said:
    I'd imagine they'd be without tortillas if the Chinese DIDN'T inject money into their economy and oil production collapses.
  • william on July 04 2018 said:
    once again the chinese make an end run around american and international sanctions meant to bring about human rights reforms in that country. venezuela is an opec country, and yet our allies within that cartel have blocked any financial support to venezuela. the international community isolates them through sanctions, china takes venezuela under their wing and exploits them.
  • Prsnep on July 04 2018 said:
    william: "...run around american and international sanctions meant to bring about human rights reforms in that country"

    william, you don't think Saudi Arabia doesn't need reforming? You have to be delusional if you think that American sanctions are purely about spreading human rights.
  • Amvet on July 05 2018 said:
    US sanctions are another of our regime change projects and nothing more.
  • Phil Mirzoev on July 05 2018 said:
    Very wise decision!! If the US (and its friends) want to starve Venezuela and its people in millions only because they have a bad government, it is good time for China to pick Venezuela up and put it under its belt as a long term partner with good relations and historical memory. Same as China does in Africa and other countries where some non-existential disagreements with the US were used by the US as a justification to "starve the people" in the 20th and 21st century (like Cuba for example)
  • Don on July 10 2018 said:
    Each of the countries mentioned are mere pawns in an attempt for global market control. China, US, and Russia are all in competition for not global domination but stake in the global market and control. Its not a matter of human rights or other things, those are side projects to an end state. Each major country in play being China, US and Russia all have different agendas with different end states. We live in a world where control is no longer asserted through force but rather through control of money. Money is what makes the world go round and it is a tool for manipulation for further influence. To each their own but the world will never change. It has been this way since the invention trade for goods. Two options learn to live in it or fight it but there is no end.

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