Key facts
- China has provided Venezuela with at least $60 billion in oil-backed financing, with total commitments exceeding $100 billion.
- Venezuela owes Chinese lenders an estimated $10 billion, to be repaid with future oil production.
- A new agreement with North American Blue Energy Partners (NABEP) grants 100-year rights over 17 Venezuelan oil fields.
- The U.S. government will have a 35% stake in NABEP's parent and rights to 20% of its oil production at cost.
- Chinese companies previously operating or pursuing these fields are displaced by the U.S.-backed producer.
- Beijing faces potential financial, commercial, and geopolitical losses due to the deal.
A new U.S.-backed oil deal in Venezuela may complicate China's efforts to recover billions in oil-backed loans. For decades, Venezuela has been a key partner for China, receiving tens of billions of dollars in loans with oil accepted as repayment. Beijing lent Caracas at least $60 billion through 2015, with total commitments exceeding $100 billion, and Venezuela still owes Chinese lenders an estimated $10 billion.
The recent multibillion-dollar agreement with North American Blue Energy Partners (NABEP), controlled by Venezuelan businessman Alejandro Betancourt, aims to expand production and commercialize Venezuela's vast petroleum reserves. NABEP has secured 100-year rights over 17 fields in the Lake Maracaibo region and the Orinoco Belt, which hold an estimated 65 billion barrels of proven reserves. This arrangement gives the U.S. government a 35% stake in NABEP's parent company and rights to 20% of its production at cost, with a right of first refusal on the remaining output.
This deal displaces Chinese companies, including China National Petroleum Corp., Sinopec, and China Concord Resources, from fields they previously operated or pursued. This threatens Beijing's upstream investments and its ability to influence the production, pricing, marketing, and use of Venezuelan oil for debt settlement. The U.S. State Department's access to production at cost and first refusal rights significantly reduce the barrels available for Chinese lenders and refiners.
Chinese Foreign Ministry spokesman Guo Jiakun stated that China's economic cooperation with Venezuela is protected by international law and that China's lawful rights must be protected. However, reversing the transfer is expected to be a difficult and litigious process for Beijing. China purchases a substantial portion of Venezuela's oil exports, often through complex methods to conceal the origin of the crude. While Venezuelan crude represents a relatively small percentage of China's total seaborne oil imports, its displacement could still impact Chinese refiners, who may seek alternative heavy grades from other suppliers.