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What’s Really Driving Oil Prices?

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China’s Worrying Oil Vulnerability

China’s Worrying Oil Vulnerability

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Chinese Company Halts Work On Venezuelan Project

PDVSA

A Chinese company hired to expand the capacity of an oil blending facility in Venezuela has halted the work because it has not been paid, Bloomberg reports, adding the news highlights the difficult financial situation of the Maduro government.

CNPC affiliate Huanqiu Contracting and Engineering Corporation was hired to boost the capacity of the blending facility by 57 percent to 165,000 bpd. The facility is part of the Sinovensa joint venture between CNPC and PDVSA. Now, the Chinese company has notified Sinovensa that it has stopped work on the expansion, according to an unnamed source and a document that Bloomberg reporters have seen.

The news of the expansion plans for Sinovensa broke last month. The venture, 49-percent owned by the Chinese state giant and 51-percent owned by PDVSA, currently produces 100,000 bpd in the Orinoco belt. The crude is a medium grade of the Orinoco superheavy that’s then blended with light crude to make the Merey blend, which, along with other medium grades, are in high demand among Asian refiners.

At the time, Venezuela’s president praised the Chinese for their help and said that would be the first phase of production expansion, with the ultimate goal of boosting Sinovensa’s output to 230,000 bpd. Now, with money tight, this goal may well remain unattainable.

Meanwhile, another Chinese company was earlier this year contracted to help PDVSA repair its refineries, which are currently operating much below capacity—many at zero capacity. Wison Engineering Services Co., a company headquartered in Shanghai, will use funds from Beijing’s Belt and Road initiative to repair Venezuelan refineries. Venezuela, for its part, will pay Wison in oil products. Fuel shortages are plaguing Venezuela and eliminating them is important for Caracas to avoid further protests.

China has remained a staunch supporter of the Maduro government despite U.S. sanctions and warnings from Washington that it should reconsider its support. Yet the Bloomberg news suggests this support is not unconditional.

By Irina Slav for Oilprice.com

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