CNPC in talks with Venezuela on US$16-bln deal

Oct. 15, 2009 (China Knowledge) - China National Petroleum Corp, the parent of PetroChina Co Ltd<601857><0857><PTR>, this month is expected to sign a US$16-billion contract with Petroleos de Venezuela to develop the Junin 4 oil field, sources reported.

The spokesman for CNPC did not deny the report and said that the deal is still being discussed.

According to a preliminary agreement already reached, the two partners will probably set up a joint venture to develop Junin 4, which is located in the Orinoco basin and currently has a heavy crude oil output of 400,000 barrels per day.

The Orinoco basin, which covers an area of 54,000 square kilometers, has 90% of the world's heavy crude oil as well as abundant natural asphalts. The crude oil reserves of the region are around 1.2 million barrels.

Venezuela exports about 300,000 barrels of crude oil to China, 70% of which is high-sulfur fuel oil.

Reportedly, CNPC, which obtained a US$30-billion credit line from China Development Bank in September, on Oct. 13 signed a memorandum of understanding with Rosneft, a Russian oil giant, to jointly build between 300 and 500 gas stations in China.

Rosneft also agreed to supply 10 to 15 million tons of crude oil to China every year in addition to the 15 million tons it already supplies. The crude oil will be processed in Chinese refineries in Tianjin.