It’s no secret that the Chinese are after Venezuela’s oil. If it wasn’t proof enough that China has lent Caracas $32bn in the last five years – most of it to be repaid in oil – on Friday construction began of an $8.3bn refinery in China’s Guangdong province able to process 400,000 barrels a day of extra-heavy crude from Venezuela’s Orinoco Belt, in a 60/40 joint venture between China National Petroleum Corp and PDVSA, the Venezuelan state oil company.
But it’s not just the Chinese who want to tap into the OPEC country’s vast oil riches. In the last week alone, Japan, South Korea and Vietnam have all signed major deals with Venezuela that will help it increase sales to Asian markets and diversify its oil exports away from its biggest client – and ideological enemy number one – the US.
Most impressively, South Korean companies have agreed to participate in infrastructure projects in Venezuela that could be worth more than $11bn.
Daewoo Engineering & Construction and STX Construction will take on an $8.8bn project that includes building a pipeline, storage facility and a harbour, while Hyundai Engineering and Construction will build a $1bn, 900-megawatt petroleum coke-fired power plant and an $800m refinery. SK Engineering & Construction has agreed to build a $500m heavy oil storage facility.
Meanwhile, the Japan Bank for International Cooperation (JBIC), together with a consortium of Japanese institutions, agreed on Tuesday to lend the Venezuelan government $1bn, of which $800m go towards expanding Venezuela’s El Palito refinery.
Then there’s Vietnam, which announced this week that Venezuela would supply its oil importer, PV Oil, with 2m barrels of crude oil a quarter.
Further evidence of Venezuela’s intentions are plans to build a Chinese-financed oil pipeline with Colombia that would take the Orinoco’s crude to Colombia’s Pacific coast, making exporting to Asia easier, quicker and cheaper.
This is all well and good. It suits Venezuela to diversify its exports, even if it’s hard to believe, as state oil company PDVSA recently insisted, that it gets more for its oil shipped to Asia than it does for what it sells in the US. The real challenge will be for PDVSA to boost production enough to satisfy all the demand.