President Hugo Chavez arrived in China, on Tuesday, on a state visit to cement ties between the two nations and more specifically to further proposals of a joint oil production venture. The proposal is to build three refineries – to process Venezuelan crude oil, and to subsequently increase crude exports to the Asian nation.
Chavez, President of the world's fifth-largest oil exporting nation, used the visit to reiterate its long-standing pledge to invest in China and as a new platform from which to stick two pumps up at Washington. The South-American OPEC nation is, despite ongoing political tensions, traditionally one of the largest suppliers of oil to the U.S., but it is now swiftly turning its attentions away from its Northern neighbors and towards furthering exports to China.
The outspoken President said that oil exports to China could soar to as much as 1 million barrels a day by 2012, up from the current daily rate of 330,000. When such levels are reached, it will make Venezuela the world's top exporter of oil to China, according to figures from OPEC.
Saudi Arabia currently holds the largest market share, shipping around 20% of the roughly four million barrels of oil a day China imports. The figure projections for the deal, considering the rising cost of fuel, suggest that the motivation for the joint venture is predominantly political and not financial. Being an inconveniently placed Central America country with a lack of pipelines, Venezuela will be forced to get oil either through the Panama Canal, around South America's Cape Horn or through routes around Africa and the Indian Ocean.
Whilst China is using Venezuela to hastily try and feed its booming industries and economy, the partnership may not help China's supply situation out all that much. Analysts predict that China's demand is growing faster than even Venezuela's picked-up export pace can possibly meet. To transport the oil the two nations have also proposed the construction of four tankers, in addition to the construction of the trio of refineries.
Venezuela’s ever-colourful premier was eager to point out that while the world is slipping into an energy crisis, his nation is busy investing. “China is investing over there, Venezuela is investing over here. We are talking about three refineries, to bring our crude, which is heavy, and process it here in China,” said Mr. Chavez.
On arrival in Beijing, on Tuesday, to meet his Chinese counterpart, President Hu Jintao, Chavez said that Venezuela would demand respect from the U.S. among others. “We're no longer the backyard of the United States,” he said. However, Beijing officials have been quick to stress that it does not want its ties with Caracas to complicate its own relations with Washington.
But, perhaps China should put into practice what it preaches, as not only is planning to supply Venezuela with combat and training aircraft but it is also set to launch the South American nation's first satellite on November 1.
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