China agrees to loan Venezuela $4 billion

November 23, 2011 - 12:30 PM

CARACAS, Venezuela (AP) — China has agreed to a new $4 billion loan to help Venezuela boost its oil output and will also help upgrade power plants and increase production of iron and aluminum, a Venezuelan official said Wednesday.

China has swiftly become Venezuela's biggest foreign lender in recent years, and has previously agreed to more than $32 billion in loans. President Hugo Chavez's government is repaying the loans with oil shipments.

Energy Minister Rafael Ramirez said during a meeting with Chinese officials that the new $4 billion loan agreement would be signed Wednesday. He said the purpose is to increase oil production involving Venezuelan and Chinese companies from about 100,000 barrels a day to about 330,000 barrels a day.

He said oil production involving Chinese companies should reach about 1.1 million barrels a day by 2014. That would be a big increase for Venezuela, which aims to raise its overall oil output from what it says is now roughly 3 million barrels a day to about 4 million barrels a day by 2015.

The infusion of cash from China has also provided key support as Chavez looks to boost spending ahead of next year's presidential election. Ramirez said Chinese companies are helping with upgrades to power plants. Chinese companies are also building public housing for the government, and are constructing railways.

Chinese and Venezuelan officials discussed not only plans to boost iron ore production, but also projects to expand a pier, dredge the Orinoco River and "expand our capacity of rail transport for transporting iron ore," Ramirez said at the televised meeting.

Another joint project aims to increase production of aluminum, Ramirez said.

Venezuela's oil exports to China stand at 410,000 barrels of fuel a day, up nearly 10-fold from the 45,000 barrels a day sold to China in 2005, Ramirez said.

In order to deal with increasing volumes of heavy oil from Venezuela, the two countries are moving ahead with plans to jointly build a refinery in China capable of handling up to 400,000 barrels a day, he said.

Much of the oil is to come from the vast reservoir of heavy crude in Venezuela's eastern Orinoco River basin. Ramirez said China will also be involved in developing a deep-water terminal in the eastern port town of Araya to enable increasing oil exports.

The long-term emphasis during this week's talks, Ramirez said, is "for us to supply all the oil that China needs for its development, and to obtain from China all necessary support in the transfer of technology and financing."