Venezuela assigns 230,000 bpd of oil to repay debt with China

The financial agreement between Venezuela and China was amended. Now, the instrument provides that, in order to pay back the three-year loans agreed with the Asian country, Venezuelan shipments of oil cannot be less than 230,000 bpd.

Last February, Venezuela's Executive Office expanded cooperation agreements with China and authorized an amendment thereof. On Tuesday, the Ministry of Foreign Affairs handed over a document entitled "Second Protocol to Amend the Venezuela-China Joint Financing Fund" for approval by Congress. However, discussion of the document was postponed until next week in the regular session of the National Assembly.

Based on the report delivered to deputies, the amendment ensures the renewal of the loan facility with the Chinese Development Bank in order to transfer USD 12 billion to the Joint Fund (which is also known as Heavy Fund ). It further details the commitments that Venezuela has to undertake to pay the loans with the Asian bank.

Article 5 of the amendment reads as follows: "The Republic is committed through the seller (Pdvsa) to sell fuel and crude oil in an amount not lower than 230,000 barrels per day by the date on which the obligations undertaken with regard to the loan facility have been completed."

Pdvsa's 2011 management report summarized part of the agreements and mentioned that in 2012 Venezuela would assign 230,000 barrels to pay back the debt. Therefore, the amendment would be ratifying that oil shipments may not be below this limit.

Rafael Ramírez, the minister of Petroleum and Mining and Pdvsa President, has said that the agreements with China are flexible. "We have estimated (the delivery of) a higher amount of barrels. However, if oil prices rise, a lower amount of barrels will be shipped," he said last February. However, the agreements set a minimum limit for deliveries.

The amendment of the agreement with China, which will be discussed in the National Assembly, reiterates that the revenues from oil sales to China will be deposited in an escort account.

According to the report, "the buyer (China) will deposit the money for the purchase of oil in an escort account, which will be used to facilitate the repayment of principal and (debt) interest."

Translated by Gerardo Cárdenas