China and Venezuela raise investment fund

BEIJING (Reuters) - China and Venezuela have agreed to double a joint investment fund to $12 billion, President Hugo Chavez said on Wednesday, lauding the socialist ideology which he said protected both countries from the global financial crisis.

The massive expansion cements a tightening relationship between energy-hungry China, which provided two thirds of the cash for the fund, and major producer Venezuela, which hopes to eventually sell Beijing a million barrels of oil a day.

The two countries also agreed plans for a joint venture refinery in Venezuela's heavy oil heartland, a fleet of four oil tankers and increased oil shipments to China.

"China is a giant, a super-giant which needs more energy. We are committed to providing China with as much as its people need, within our capacity of course," Chavez told journalists after a dinner with Chinese counterpart Hu Jintao.

The self-styled revolutionary and florid critic of Washington is keen to reduce his nation's traditional reliance on energy markets in the United States. He said booming China could become Venezuela's number two energy trading partner next year.

"In the face of the collapse of global capitalism, we can say: how fortunate that China had a revolution, how fortunate that Venezuela had and still has a revolution, how fortunate that we got to know each other," he said.

Beijing, by contrast, is keen to play down the political nature of its ties with one of the world's most vocal left-wing leaders.

But it is constantly hunting for new suppliers of crude, because it gets nearly half its needs overseas, and President Hu said he hoped to work more closely with Caracas.

"China is willing to deepen upstream and downstream integration and cooperation with Venezuela in the oil sector, and will continue supporting Chinese firms investing in Venezuela," he told a bilateral meeting, the official Xinhua agency said.

REFINERY, TANKERS

China will provide $4 billion for the expanded investment pot, which is backed by Venezuelan crude and topped up with $2 billion of Venezuelan cash, said oil minister Rafael Ramirez.

"The fund is supported by our supply of oil," he told reporters on the sidelines of a signing ceremony.

Venezuela has already spent two thirds of the original funds on projects ranging from education and electricity to railways and irrigation, and been paying back its loans with shipments of crude oil and refined products.

China's state-owned Sinopec and Venezuela's state oil firm PDVSA also agreed to a feasibility study for a plant to process extra heavy crude, documents seen by Reuters showed.

The planned refinery in Venezuela's Orinoco belt will have a capacity of 300,000 barrels per day and process crude from the nearby Junin 8 block, operated by Sinopec, Ramirez said.

The two companies had started work on the engineering, he said, but declined to give details or a date for output to start.

He confirmed comments by Chavez that Venezuela had plans to eventually build three joint venture refineries in China. A deal for the first was signed earlier this year.

PDVSA and CNPC agreed to increase fuel oil shipments to China's CNPC to 500,000 barrels per day (bpd) by the end of 2009 from the current 364,000 bpd, said Ramirez.

The two have a shipping joint venture that will build the shared very large crude carriers that both countries hope will help ensure trading is profitable, despite the large distance been them.

(Editing by Anthony Barker)

WhatsAppFacebookTwitterLinkedinBeloudBluesky