(OilPrice.com, Irina Slav) – China’s Development Bank has approved a US$5-billion loan for Venezuela’s oil industry, Bloomberg reports, quoting the troubled South American country’s Finance Minister Simon Zerpa.
“We’ve received the authorization for a direct investment of more than $250 million from China Development Bank to increase PDVSA production, and we’re already putting together financing for a special loan that China’s government is granting Venezuela for $5 billion for direct investments in production,” the official said.
The loan is literally a lifeline for PDVSA, which has been unable to stop an accelerating production decline resulting from years of mismanagement and a cash crunch brought about by the tightening grip of U.S. sanctions.
International Energy Agency figures suggest Venezuela produced an average 1.36 million barrels of oil daily last month. This is down from 2.9 million bpd five years ago. President Maduro vowed to increase production by 1 million bpd by the end of the year, but he admitted that the goal would be difficult to meet.
It became even more difficult after ConocoPhillips seized PDVSA storage facilities in the Caribbean, keeping it from meeting its export obligations and creating tanker bottlenecks at Venezuelan ports.
PDVSA’s exports to China also suffered as a result of the quickly deteriorating situation. Shipping data from Reuters last month suggested that these could have plummeted to an eight-year low. This would have provided additional motivation to China to lend Venezuela a hand with growing its oil production.
As a major creditor and ally, China is sure to benefit from some preferential oil export conditions amid rising international prices that would ensure its continued backing of Caracas.
“One of the best things about Venezuelan oil was its stable volumes for all these years and competitive prices,” a senior Chinese oil industry official with direct knowledge of the Venezuelan supply issues told Reuters last month. “But now they seem in very bad shape, not having the money to upgrade port facilities, no money even to remove the high water content in crude oil.”