Venezuela, China Sign Oil Deals

CARACAS -- Venezuela and China gave a new boost to their thriving economic ties Tuesday, signing a package of agreements that advances China strategy of locking in access to the South American country's vast oil reserves.

After two days of talks in Caracas, the China National Offshore Oil Corporation will help the government of President Hugo Chavez develop the Boyaca 3 oil block in the Orinoco-belt, a large heavy-crude basin in Eastern Venezuela.

The move is part of Venezuela's efforts to increase oil sales to China to 1 million barrels per day from the 400,000 barrels per day it says it currently supplies. Under Chavez, Venezuela has tried to curb oil exports to the U.S. and searched for new markets. Despite his efforts, the U.S. remains the main destination for Venezuela oil, with sales averaging around 1 million barrels per day.

The China National Petroleum Corporation also moved forward by securing access to another oil block in the Orinoco region that could eventually produce 400,000 barrels of oil per day.

The Chinese oil titan also agreed to build a refinery with Venezuela that will process crude from a joint oil venture between the two countries that operates the Junin 8 block.

CNPC also plans to bid alongside French firm Total in early 2010 in an upcoming oil auction known as Carabobo, which is considered the most important drilling project in Venezuela in more than a decade.

China and Venezuela have cemented a close economic bond during the last few years. Venezuela is eager to receive Chinese investment to develop its heavy-oil reserves, which require massive financing. Venezuela is a key objective for China as it pushes to secure oil and other natural resources for its economic expansion.

The two countries have developed a $12 billion development fund, with China depositing $8 billion in the fund in exchange for Venezuelan oil. The fund focuses on bankrolling infrastructure projects in Venezuela.

The economic ties between the two countries has spilled to other areas. Chinese companies launched a telecommunications satellite for Venezuela and are working on projects ranging from building a car factory to building a railway system.

Trade between China and Venezuela reached $10 billion in 2008, nearly three times the trade figure posted in 2003. China is now Venezuela's second largest trading partner, surpassed only by the U.S.