Here is update about the Chavez-China connection on Venezuelan heavy crude as it gets firmer footing (despite a lower netback value over US placement). China is having a hard time balancing between locking up new source crude it desperately needs to minimize risk exposure on MidEast crude but not upset the US where the crude obviously came from US stolen assets & out of it’s future supply. In addition to the 4 new Tankers the pair are building to offset some higher freight cost exposure, China has recently launched a satellite for the region to help with communications on phone & media conferencing (probably using same stolen US technology that they used for this weeks space walk).
There is also another version of news article where Chavez try’s to claim he has enough oil for current customers & to ramp up China – see: “Chavez says has enough oil for all customers” Bangkok Post – Thailand’s English news – Sep 25 2008, By GILLIAN WONG, Associated Press Writer. Venezuela’s plans to triple oil shipments to China over the next several years will not mean a cut in sales to the United States and other countries President Hugo Chavez said Thursday. (Link @ http://www.axilltv.com/bkpost-2.php?newsid=343276 ).
When you read between the lines of this Chavez coop article ……. you can see this claim is obviously BS even if Chavez has the crude he would make the US grovel to get it – but he doesnt have the full crude production due to the lack of investment in existing production well sites & because his inexperienced government oil workforce just do not have the technology to keep production at pre-nationalized levels. He had bought some time by adding back the volume from separate Orimulsion fields & production (was originally the best & most productive in region) but these additional sales to China have canceled the volume out again.
I believe one of the reasons (on top of spiting in face US) is that Chavez hopes the China involvement will replace the US & Venezuelan technical expertise to not only produce but refine the complicated heavy oil that he lost by expelling both his own people and his US JV partners. A real risk for the US is that China will now get full access to both ExxonMobil & ConocoPhillips technology for both heavy oil production and coking technology that they will obviously steal and reuse for their own country. The risk that Chavez is to stupid to see is that China has Heavy Oil / Bitumen crude in 9 of its 14 domestic crude fields that it needs this technology to develop. And as bonus he has already given them the “Orimulsion technology” that PDVSA & US partners helped develop for the current plant that has been set up to take the current 330 MBD of Crude & turn it into Orimuslion for the Power plants China built & Chavez had contracted to supply before he unilaterally stepped away from the obligation as he did with all the other customers that did not agreed to the price increase of oil portion from $1/Bbl to $17/Bbl 3 years ago.
Anyone using Venezuelan Bitumen / syncrudes should fast forward alternate supplies from Canada if they do not want to be caught short from either force majure shipments or high-jacked on price at next round of contract negotiations.
The bright spot on the horizon is that the combination of fraud investigations into crude price speculations/manipulation, the price driven demand destruction in the US and the US financial condition has crude price in free-fall back towards fundamental price values and perhaps even lower due to the demand reduction ontop of normal seasonal consumption reduction levels.