Advertisement

China to Invest $5 Billion in Venezuela Oil Projects

The deal is the Asian nation's latest in Latin America to help meet its rising energy needs.

August 29, 2006|Chris Kraul | Times Staff Writer

CARACAS, Venezuela — Officials announced Monday that China had agreed to invest $5 billion in energy projects here, a deal that underscored the Asian nation's way of doing business in Latin America: Lock up significant natural resources with promises to fund huge public works projects.

China's investment will be poured into new and mature oil fields through 2012, Energy Minister Rafael Ramirez told state television. The announcement in Malaysia followed a six-day trip by Venezuelan President Hugo Chavez to China, his fourth since taking office.

During the trip, Chavez said he would triple sales of oil to China to 500,000 barrels a day by 2009.

China also agreed to build 13 oil drilling rigs and 18 oil tankers for Venezuela. As part of the deal, China agreed to help Venezuela build a $9-billion railroad line, as many as 20,000 housing units and a fiber-optic network.

Last year, China began work on a communications satellite for Venezuela that should be in orbit by 2008.

The Venezuelan projects are on a long list of Chinese projects in the region. China has signed energy deals in at least seven countries in the Western Hemisphere, from the tar sands of Canada to natural gas fields of Argentina.

China said it would invest in a new $8-billion railway in Argentina, while acquiring a stake in that country's Pluspetrol oil and gas firm. The Asian nation has signed $10 billion in energy and transportation deals in Brazil, including a commitment to help finance a $1-billion gas pipeline, several hydropower projects and a trans-Amazon road linking Sao Paulo to Lima.

In Bolivia, China announced a $1.5-billion investment in oil and gas exploration in state-run oil company YPF Boliviano while promising to fund power plants and pipeline infrastructure to deliver gas to homes. And in Ecuador, China's $1.4-billion purchase of assets from EnCana Corp., a Canadian oil company, included an interest in one of Ecuador's two main oil pipelines.

Latin America isn't the only focus of China's search for more energy. China is financing $4 billion worth of refinery upgrades in Angola and Nigeria.

In Africa as in Latin America, the deals are a way of scoring political points and securing access to raw materials for China's economic expansion, which averages 9% a year. In some cases, Latin American and African nations use oil to pay China for building public works projects.

In Latin America, China has sought to keep from rankling the United States, with which trade relations are more important. But the practice was broken last week when Chavez announced that China was endorsing Venezuela's bid for the rotating Latin America seat on the 15-member security council.

Venezuela's candidacy is strongly opposed by the United States, which favors Guatemala. But the Chinese support was not much of a surprise: Guatemala recognizes Taiwan diplomatically, an issue that rankles China.

Chinese leaders have announced many of the Latin American deals during their visits to the region.

It was during one of those visits in 2004 that Chinese President Hu Jintao said China would invest $100 billion over the next decade in Brazil and Argentina on a variety of infrastructure projects. Chinese trade with Latin America generally is growing: From 1994 to 2004, trade between China and Latin America quintupled to $40 billion a year. U.S.-China trade is at more than $400 billion.

China's growing commercial presence in South America has raised alarms in the U.S. Congress, which last fall held hearings to determine whether U.S. interests were at risk. The consensus of those who testified was that they were not.

But some analysts including Erica Downs and Peter C. Evans of the Brookings Institution, have noted that cut-rate Chinese government financing on infrastructure projects may pose "troubling possibilities" of unfair competition to private firms.

At the congressional hearing last year, Johns Hopkins University professor David Lampton said that Chinese energy investments in South America would help create a "larger global pool of available energy" and that consumers around the world would benefit from the additional supply.

"Overall, Chinese economic activity in the region carried out under relatively free trade conditions will boost economic well-being in Latin America," Lampton said. "A healthier, more diversified Latin America is in the interest of the United States. U.S. observers and policymakers generally should be relatively relaxed about Chinese activity there."

Venezuela accounts for just over 1% of the 3.4 million barrels imported by China daily. But with the Asian Nation's oil needs rising 7.5% a year, or five times the U.S. energy consumption growth rate, China is looking to nail down more supplies. It is now the world's second-largest consumer of oil at more 7 million barrels a day, a figure that may double over the next 10 years at the current growth rate

Advertisement
Los Angeles Times Articles
|
|
|