Venezuela, China to Build Refineries, Boost Sales

By Steven Bodzin and Wang Ying

Sept. 24 (Bloomberg) -- Venezuela, the world's fifth-largest oil exporter, and China plan to build refineries and boost oil shipments, said President Hugo Chavez, who is seeking to lessen dependence on the U.S.

The countries will sign agreements that will include building a refinery in block Junin 8 in the Orinoco Belt, South America's biggest oil area, Chavez said today in Beijing in a phone interview with Venezuelan state television. The accords will deepen cooperation between the two countries, he said.

Chavez, who is in China this week on a tour that includes Russia and Cuba, has sought closer ties with U.S. rivals. Earlier this month, Chavez expelled the U.S. ambassador to Caracas and signed an agreement with Russia's OAO Gazprom on offshore projects. China, the world's second-biggest oil user, needs fuel as its economy grows at a double-digit pace.

``China is short of oil and it has to extend cooperation with foreign countries,'' Xia Yishan, a senior research fellow with the China Institute of International Studies, said by phone in Beijing. ``The country will need to increase imports and expand overseas exploration to meet local demand.''

PetroChina Co., the nation's biggest oil producer, and Petroleos de Venezuela SA signed a ``framework'' agreement on oil supplies today. China Petrochemical Corp., the nation's largest oil refiner, signed an initial accord with Venezuela's state oil company. No details were provided.

China's gross domestic product expanded 10.1 percent in the second quarter. Last year, its economy grew 11.9 percent, the quickest pace in 13 years. The nation will surpass the U.S. as the world's biggest energy consumer in five years, Jeremy Bentham, vice president of global business environment at Royal Dutch Shell Plc, said on Sept. 16.

Cabruta Refinery

China and Venezuela are continuing work on a previously announced refinery at Cabruta and both governments will sign several agreements, Chavez said, without providing details. Cabruta is located at the Latin American country's geographical center.

The two countries signed 12 accords today at a ceremony at China's Great Hall of the People in central Beijing. The agreements cover trade, energy, infrastructure, communications, education and culture.

The two countries had agreed in May to build a refinery in China and create a joint venture to drill for oil in the Junin 4 area, where China National Petroleum Corp. has been quantifying and certifying reserves. Venezuela plans to export 1 million barrels of oil a day to China by 2011 or 2012, Chavez said then.

Trade between the nations will exceed $8 billion this year and Venezuela is currently shipping 331,000 barrels a day of oil and oil products to PetroChina.

U.S. Sales

Bilateral trade in the first seven months reached $6.23 billion, compared with $5.9 billion for all of 2007, Foreign Ministry spokeswoman Jiang Yu said yesterday.

The Latin American nation supplies 4 percent of China's total oil imports, Jiang said.

Chavez, who took office in 1999, has repeatedly threatened to cut off oil sales to the U.S., alleging its government has attempted to assassinate or overthrow him. The U.S. buys about two-thirds of Venezuela's daily exports of 2 million barrels.

``China-Venezuela relations are normal state-to-state relations, not based on ideology, and are not targeted against any third party,'' said Jiang.

To contact the reporters on this story: Steven Bodzin in Caracas at sbodzin@bloomberg.net; Wang Ying in Hong Kong at wang30@bloomberg.net.