Venezuela, China
Deepen Relations,
Set Oil-Rig Pact
By RAUL GALLEGOS in Caracas, Venezuela, and DAVID WINNING in Beijing
Staff Reporters of THE WALL STREET JOURNAL
August 24, 2006; Page A6
Venezuela aims to become a top oil supplier to China and plans to increase oil sales to the oil-thirsty economy to 500,000 barrels a day in 2009, Venezuela's president said.
"We're getting to 150,000 barrels of crude a day [in sales to China], and next year we will double it to 300,000 barrels a day, and we will reach 500,000 barrels a day in 2009," President Hugo Chávez said during a telephone interview broadcast on a state-owned television channel. "With this, Venezuela becomes one of the top oil suppliers to the Chinese giant."
Mr. Chávez is in the middle of a six-day trip to Beijing, his fourth visit since taking over as president in 1999. During the trip he has signed deals for housing, mining, telecommunications and oil with Chinese companies.
One of those deals was between state oil company Petróleos de Venezuela SA, or PdVSA, and China National Petroleum Corp.'s service-and-engineering unit, involving sales of oil-drilling rigs, a person familiar with the plans said.
The deal will consist of the purchase of 12 Chinese-manufactured oil-drilling rigs, which are expected to be produced by Baoji Oil Machinery Co., CNPC's largest oil-equipment maker by capacity, the person said. The two companies also will set up a joint-venture factory in Venezuela for the production of more drilling rigs, the person familiar with the plans added.
"Chinese-made drilling rigs are competitive in terms of technology and price, although China is still weak in key control software," the person knowledgeable about the signing added.
No details were available on the value of the deal. Depending on their use, oil rigs can cost less than $10 million or as much as $100 million for the complicated structures used to reach oil deposits deep beneath the ocean. In the past few years, surging oil demand and the need to explore for more reserves has sharply pushed up the costs of buying or renting drill rigs.
"We signed a deal with CNPC for a joint venture in the Orinoco oil belt," Mr. Chávez said. "We will soon drill a new well with them in the Junin 4 field."
The leftist leader is expected to tour a plant where the Chinese are set to build a satellite for the Venezuelan government to be named Simon Bolivar, after the country's 19th-century independence figure.
Mr. Chávez has sought to strengthen relations with Iran, Cuba, China and Russia, among others, to slowly reduce reliance on business dealings with the U.S.
A delegation from PdVSA visited Baoji in March and expressed interest in long-term cooperation, the Chinese company said in a statement on its Web site.
Venezuela has a great demand for oil-drilling rigs for onshore and offshore development, given scant domestic manufacturing capacity, a vice president of PdVSA was quoted as saying in the statement.
Among the series of agreements that China and Venezuela are expected to sign, one pact could include accords for China to begin extra-heavy oil production in Venezuela's Orinoco River basin and to jointly develop Venezuela's eastern Zumano oil and gas fields.
China is seeking access to energy sources in Latin America to fuel its booming economy. Mr. Chávez's itinerary has been closely guarded, but according to officials and a state media report, the Venezuelan leader, who is traveling with Oil Minister Rafael Ramirez, is expected to meet with China's premier and companies in the coastal province of Shandong.
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