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Aruba, March 27, 2012 - China has poured billions of dollars into Venezuela’s oil sector to expand its claim over the country’s massive oil reserves.But Beijing is getting relatively little for its investments, and Chinese officials are increasingly frustrated with Venezuelan President Hugo Chavez.

Mr. Chavez said his goal is to send 1 million barrels of oil a day to China, which has given Venezuela more than $30 billion in loans and promised billions of dollars more in energy investments by 2016. PDVSA claims to send 410,000 barrels a day to Chinese markets, the bulk of which is used to pay back the loans. Tom O’Donnell, an oil analyst who teaches at the New School University and writes an oil-industry blog, the Global Barrel, said the payoffs of China’s loans amount to a “consolation prize.”

He said China’s goal is not to get oil for loans, but to have its own national oil companies contract for major oil-production projects in Venezuela’s Orinoco Tar Sands, the largest single known petroleum reserve in the world, with 513 billion barrels of heavy crude oil.
“The Chinese have not gotten the kind of preferential access they want [to the tar sands], and my sources tell me they are extremely unhappy,” said Mr. O’Donnell.

In 2010, China signed a deal to help Venezuela develop a major Orinoco oil field known as Junin 4, which includes the construction of a facility to convert heavy oil to a lighter crude that could be shipped to a refinery in Guangdong, China. “Apart from money, there seems to be little that China can offer Venezuela in the oil industry,” he said, adding that a “culture gap will make working with China very difficult for Venezuelan oil people, who were mostly trained in the U.S.”

Erica Downs, a former energy analyst for the Central Intelligence Agency now with the Brookings Institution in Washington, said the Junin-4 project could be key to China’s future in Venezuela. “If all that happens, China will be in a position to take substantial volumes of Venezuelan oil,” she said. “The problem is that the project hasn’t gotten off the ground.”
Ms. Downs said Venezuela is far from living up to Mr. Chavez’s export goals for Beijing and that PDVSA’s claims of sending 410,000 barrels a day do not match Chinese customs data, which show 322,000 barrels per day of crude and fuel oil imported from Venezuela last year.

“Although Venezuela’s oil exports to China have grown along with the volume of oil-backed loans extended by China Development Bank to Caracas, the delivered volumes still fall short of Chavez’s goal of eventually shipping 1 million barrels per day to China,” she said.
Critics of the loans say Mr. Chavez is using the so-called “China fund” as his personal piggy bank.

The Chinese also seem to be increasingly wary. Internal PDVSA documents released by a Venezuelan congressman show that the Chinese balked at a $110 billion loan request by Mr. Chavez in 2010, after PDVSA officials failed to account fully for where the money would go.

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