China and Venezuela Agree to oil deals

Sources: Xinhua, China Daily

China and Venezuela reached agreements this weekend on a series of oil deals. Venezuela has been seeking alternative buyers of her petroleum to break the dependence upon US purchases. China is now the second-biggest oil consumer, and Venezuela is the world’s fifth largest oil exporter. This new deal is consummated with the hopes that Venezuela will eventually export 1 million barrels per day to China by 2012. This is nearly one-third of its current output at 2.7 million barrels per day. Currently, Venezuela exports 160,000 barrels per day to China, while 1.5 million barrels per day are exported to the United States.

In addition to the increased exports, China and Venezuela are agreeing to pursue joint ventures in the oil sectors of both states. The Chinese National Petroleum Corporation (CNPC) also has agreed to invest a 40% stake in various oil projects in Venezuela. There will also be mutual investments in China-based oil refineries. Finally, Venezuela is likely to build tankers to ship the crude oil to China. The CNPC has been involved with a the Venezuelan oil enterprises since 1997.

Questions: How will US influence wane in Latin America as a result of lessened dependence on US oil purchases? Also, how does this play into the larger Sino-US economic competition?