Venezuela, one of the world's largest oil producers, is seeking new markets to reduce its dependency on exports to the United States. This is the president’s fifth visit to China, aimed at deepening cooperation between the two countries.
This deal could make Venezuela the world’s top exporter of oil to China, based on current figures from OPEC. Saudi Arabia currently holds that mark, shipping about 20% of the roughly four million barrels of oil a day China imports.
Venezuela has already climbed the ranks of China’s major oil suppliers. It shipped the equivalent of 360,000 barrels a day last month, according to state-controlled oil company Petroleos de Venezuela SA, up from 280,000 barrels a day earlier this year.
Mr Chávez has long hoped that fast-growing China could become an important alternative market for Venezuelan crude and allow him to divert supplies from the US, which has caused unease in Washington. He said exports to China would more than treble to 1m barrels per day by 2012.
Distance and technical obstacles have caused considerable scepticism within the oil industry about the likelihood of Venezuela selling large volumes of oil to China.
Bilateral trade is expected to exceed $8bn this year, from less than $200m a decade ago. Some 26 agreements are to be signed during Mr Chávez's visit, including the construction of four oil tankers and projects in agriculture, telecommunications, electronics and petrochemicals. Before arriving, Mr Chávez said Caracas would buy 24 Chinese military aircraft and also planned to launch its first satellite from China in November. The visit underlines the two governments' strengthening relationship.
Mr Chávez's visit - which comes between stop offs in Cuba and Russia - could cause some difficulties for Beijing, which usually tries to avoid open confrontations with the US and eschews the Venezuelan leader's outspoken rhetoric. Chinese diplomats have regularly argued that the country's emergence will not lead to oil supplies being diverted from other countries.
However, China also sees Venezuela, which has substantial undeveloped oil reserves, as an attractive long-term partner to boost its energy security.
"To establish the strategic partnership with Venezuela would help China expand its overseas sources of oil in order to ensure its energy safety," said Zou Jianhua, a professor at Zhongshan University in Guangzhou.
David Johnson, analyst at Macquarie Securities in Hong Kong, said that it made sense for Chinese companies to attract partners to invest in building new refining capacity in China. It was less attractive to build refineries in Venezuela.
Author: Jo Amey
