Analysis: Venezuela ups exports to China

MIAMI, Oct. 24 (UPI) -- Venezuelan oil exports to China are on the rise at the same time sales to the United States are on the decline, the U.S. Department of Energy reported.

Venezuela’s state-run energy company PDVSA announced South America’s largest oil exporter shipped an average of 197,000 barrels per day of crude oil and byproducts to China so far in 2007, El Universal newspaper reported Tuesday.

While that amount pales in comparison to the nearly 1.4 million bpd of Venezuelan oil that was exported to the United States in July, China’s exports have risen nearly three-fold since last year.

Erik Kreil, an international oil market analyst at the U.S. Energy Information Administration, noted that Venezuela’s exports to China were 27,500 bpd day in the first half of 2005, the first full year Beijing began pursuing Venezuelan petroleum.

By the first half of 2006, Venezuelan oil exports reached 70,000 bpd.

Kreil and others attribute the increase to China’s own growing demand for fuel, as well as Venezuela’s desire to diversify its customer portfolio and reduce its dependency on the United States.

“But China can only take so much,” Kreil told United Press International Tuesday. “The bottom line is there is only so much they can diversify away” from the United States.

Venezuelan President Hugo Chavez has made clear his intention to do just that, sparking some concerns the reduced output to the United States was in fact a policy decision.

In February, Venezuela's Foreign Ministry adopted a "take 'em or leave 'em" attitude toward the United States, suggesting its petroleum industry could survive without the billions of dollars in annual revenue from its largest customer.

"We are going to keep selling oil to North America because we are a serious country and we sell it to North American society," said Foreign Minister Nicolas Maduro earlier this week in response to remarks by U.S. officials. "(But) if they say they do not need it, well, let them stop buying it."

Venezuela supplies about 12 percent of the oil imported by the United States, making it Venezuela's largest customer. It is the No. 4 U.S. supplier.

Maduro was reacting to remarks by Nicholas Burns, U.S. undersecretary of state for political affairs, who said the United States was stepping up its efforts to use biofuels to reduce its dependence on Venezuelan oil. Indeed, U.S. officials from President Bush down have pledged to reduce the use of foreign oil and instead look to biofuels such as ethanol.

But analysts like David Pumphrey, deputy director and senior fellow for the energy program at the Center for Strategic & International Studies in Washington, said the reduction of U.S. exports was more likely the result of production shortcomings and not political rhetoric.

“I don’t think we have direct evidence that relations (between Venezuela and the United States) have anything to do with it,” Pumphrey told UPI Tuesday.

In July, Luis Vierma, exploration and production vice president at PDVSA, said Venezuelan oil faces a "significant operational emergency" if it does not increase the number of rigs operating in the country and that the state firm fell short of its 2007 goal of getting 191 rigs online in 2007 and producing some 3.3 million bpd.

So far, he said, 112 rigs were online as of July, and by the end of the year their numbers would only likely increase to 120. "Venezuela is moving toward technological independence, but it will take a long time," said Vierma.

PDVSA's independence could take even longer considering Venezuela's oil output is believed to have slipped by more than 250,000 barrels per day from a year ago, according to the Paris-based International Energy Agency. Production has reportedly decreased from 2.6 million bpd to 2.37 million bpd.

Some opposition lawmakers have accused Oil Minister Rafael Ramirez and others in PDVSA of corruption.

Hoping to counter the production shortfall, PDVSA announced recently it was investing $3.5 billion in new oil rigs, a much-needed injection of cash for improvements to a sector that some experts say has been abused by Chavez for his social programs.

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