Petroleum trade and investment of China in Venezuela

Venezuelan President Nicolás Maduro has travelled to Beijing and will probably hold talks on energy and debt repayment during this visit.

China, the world's largest petroleum importer, is Venezuela's biggest creditor and a major player in the country's petroleum and gas sector. Venezuela has the largest proven petroleum reserves in the world, but the country's petroleum production has decreased to a quarter of the last 20 years under the influence of years of mismanagement. In a report, Reuters reviewed China's trade, investment and lending activities in Venezuela's petroleum and gas sector:

Petroleum trade

Despite US sanctions, China has been one of the regular buyers of Venezuelan petroleum. After China National Petroleum Corporation (CNPC) stopped buying Venezuelan petroleum in August 2019 following the tightening of US sanctions, China has been receiving Venezuelan petroleum through traders who sell the embargoed country's petroleum under the guise of Malaysian petroleum.

The tracking statistics of Kepler's petroleum tanker show that China bought 110 million barrels or about 300,000 barrels per day of Venezuelan petroleum last year. According to the estimate of Vertexa petroleum tanker monitoring company, the import of petroleum from Venezuela to China under the guise of Malaysian petroleum, or mixed bitumen was an average of 430,000 barrels per day in the first eight months of 2023.

Also, China Aerospace Industry and Science Corporation (CASIC), a state-owned and defense-focused company, has separately shipped Venezuelan oil to China since November 2020 to help repay Venezuela's debt to Beijing. The customs green channel entered China and are not subject to the import quota system.

Since September 2019, China has not reported any official statistics for petroleum import from Venezuela. Venezuela's petroleum grades, which are mainly Merey and Buscan heavy sour petroleum, are mostly used by private refineries in China's Shandong province and are usually declared at customs as diluted bitumen to avoid being included in import quotas.

China National Petroleum Corporation (CNPC) in Venezuela

CNPC has been active in the development of Venezuela's petroleum and gas sector for about three decades. CNPC halted new investments in the country in 2009 and instead focused on maintaining a small number of existing projects, company officials told Reuters last week.

According to CNPC website statistics, the company's activities in Venezuela include:

In 1997, CNPC won contracts to mine the old Intercampo field in Venezuela's Lake Maracaibo and the Caracoles field in the eastern region of Venezuela.

In 2001, CNPC entered into a joint venture agreement with Venezuela's state-owned petroleum company, PDVSA, to develop extra-heavy petroleum in the Orinoco Belt territory, which has the world's largest reserves of heavy petroleum. The partnership was expanded in 2006 to develop the Zumano field, which is near the Orinoco Belt, and included a facility to produce exportable petroleum from the extra-heavy petroleum extracted in 2007.

CNPC currently owns a 40% stake in the joint venture, now called Petrolera Sinovensa, and operates a number of petroleum blocks in the Orinoco Belt.

CNPC has not committed to any new petroleum projects in Venezuela since 2009, when it committed to investing in the Orinoco Belt's Junin 4 Block, a senior company official told Reuters.

Loan for petroleum

The development of Venezuela's petroleum assets has been financed by Chinese state-owned banks under loan-for-petroleum contracts. Since 2007, late Venezuelan President Hugo Chávez has agreed to a $50 billion line of credit and loan-for-petroleum contracts with China.

Falling petroleum prices and declining production from Venezuela's fields meant Caracas had to ask China for a reprieve in 2016 to pay its debts.

According to the statistics provided by Venezuela to OPEC, Venezuela's petroleum production in 2022 decreased to 716,000 barrels per day, which is a significant drop compared to the production level of 2.8 million barrels per day 10 years ago.

In August 2020, the Maduro government had to enter into negotiations for a deadline to pay about 19 billion dollars of debt to Chinese banks due to a lack of liquidity.