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China cozies with Venezuela

China has struck a $20 billion oil deal with Venezuela. In exchange, China will eventually gain access to roughly 400,000 barrels of oil per day. That’s roughly 5% of China’s daily consumption. Half of the deal with be conducted in Chinese renminbi.

This deal for oil with Venezuela is one of the biggest deals China has ever done. It’s also more-expensive oil, given the distance it has to travel to get to China. Much of Venezuelan oil is also heavy oil, which is a lower grade. You need special refineries to handle it and most of these are in the US.

Forbes Blogs reported that last year that China approved the construction of a large refinery in Guangdong Province and there are a number of new refinery projects under way, with more planned.

Most of them are in Asia and the Middle East. Chinese state oil giants China Petroleum & Chemical Corp. and CNOOC are already active in the extraction business in North America.

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