(Updates to add comment from oil minister in third paragraph.)
Nov. 22 (Bloomberg) -- China Development Bank will lend Venezuela $4 billion to increase oil production at ventures held by Petroleos de Venezuela SA, the state oil company, and Chinese companies, said Venezuelan Oil Minister Rafael Ramirez.
The oil ventures with China produce 112,000 barrels a day in Venezuela and will use the funding to increase output to 1.1 million barrels a day in 2014, Ramirez told reporters today in Caracas. Venezuela is currently using 400,000 barrels a day of the 410,000 barrels of oil a day it sends to China to pay back loans, said Ramirez.
“To date, we have obtained credit from China for $32 billion that we can pay back with oil,” said Ramirez. “We use market prices for the transactions. The deal is transparent.”
Venezuela uses set prices for oil sent to China to pay back loans, and PDVSA, as the Caracas-based company is known, receives the difference if market prices are higher, said Ramirez. The South American country produced 2.78 million barrels a day in September, according to the Joint Organization Data Initiative.
“We changed the way we paid back loans to China in 2009,” said Ramirez. “The payment used to be deducted from royalties paid to the state, and now PDVSA only receives the difference between the price set in the loan and the market price.”
PDVSA expects to receive more than $7 billion from China for oil shipments this year after deductions are made to pay back loans at the set prices, said Ramirez.
“In the first tranche of the loan, we used a price of $50 a barrel and in the second tranche, the price was $40 a barrel. In this new tranche, the price we are using is $70 a barrel.” said Ramirez. “The market price is higher, so we’ll get more. For that reason, we are able to cover our costs.”
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