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PetroChina is looking to drop Venezuela’s state-owned oil firm PDVSA as an equity partner in a planned and long-delayed US$10-billion oil refinery and petrochemical complex in southern China, Reuters reported on Thursday, quoting executives and an official with the Chinese company and its parent CNPC.
The plan to dump the ailing Venezuelan oil firm is not a result of the new sanctions that the United States imposed on PDVSA earlier this week; the reason behind the Chinese decision is the continuously deteriorating finances of Venezuela’s oil company in recent years, two executives at PetroChina’s parent company China National Petroleum Corporation (CNPC) told Reuters.
“There will be no role of PDVSA as an equity partner. At least we don’t see that possibility in the near future given the situation the country has been through in recent years,” one of the executives said.
PDVSA was initially planned to be an equity partner with a 40-percent stake in the refinery and petrochemical project, with the refinery originally designed to process Venezuelan crude oil and to have a capacity of 400,000 bpd.
In the summer of 2018, PetroChina had to reconfigure the refinery—approved in 2011 but without notable progress since—to be able to process crude grades other than Venezuela’s, as the Venezuelan production collapse and deteriorating finances at its oil firm PDVSA were putting future crude oil supplies at risk, S&P Global Platts reported in July.
Related: Oil Rallies As Saudis Cut Exports To The U.S.
The PetroChina refinery has changed plans and will not restrict crude supply to just Venezuelan oil, but it could be capable of processing other heavy crudes from Middle Eastern exporters such as Saudi Arabia and Iran, a trading executive at PetroChina told Reuters today.
PetroChina’s plan to dump PDVSA as an equity partner not only adds to the pain of the Venezuelan oil firm, but also highlights the cracks in the Chinese-Venezuelan relations.
China has extended US$50 billion credits to Venezuela under the form of loan-for-crude deals. Back in 2015, according to Reuters, Venezuela asked for amended terms to repay the debts as it was struggling with plunging production amid plunging oil prices. China, however, has not extended large new loans to Venezuela, but has instead started extending the grace periods or approving minor investments.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.