Venezuela signs new oil deals with China, imposes power cuts on industry

After two days of talks in Caracas, the China National Offshore Oil Corporation signed a deal to help develop the Boyaca 3 bloc in the Orinoco belt—part of Venezuela’s effort to boost oil sales to China to 1 million barrels per day from the current 400,000 bpd. Under President Hugo Chávez, Venezuela has tried to reduce oil exports to the US and sought new markets. The US remains the main destination for Venezuela oil, with sales averaging around 1 million bpd.

The China National Petroleum Corporation also secured access to another oil bloc in the Orinoco region that could eventually produce 400,000 bpd. The Chinese oil titan additionally agreed to build a refinery with Venezuela that will process crude from a joint oil venture between the two countries that operates the Junin 8 bloc. Finally, the CNPC plans to bid alongside the French firm Total in an upcoming oil auction known as Carabobo, considered the most important drilling project in Venezuela in more than a decade. (Dow Jones, Dec. 23)

The new deals come as Venezuela has imposed sweeping power cuts on industry and businesses in order to save its limited energy resources and avoid mass blackouts. The government said the cuts were because of falling water levels at the Guri hydroelectric dam. A drought in the region has caused water levels to drop dramatically, and Energy Minister Angel RodrĂ­guez warned that without cuts, the dam could stop feeding the power grid early next year. Businesses that do not comply with the new rationing measures will be forced to close for one day, or three days for repeat offenders. The government also ordered businesses to draw up plans to cut energy use by 20%. (BBC News, Dec. 23)

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