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Venezuela And China Amend Oil-For-Loans Agreement

The amendment to the agreement, published in Venezuela`s Official Gazette, also removes a three-year payment term for one of the three tranches of the loan. The other two tranches remain at three years. VENEZUELA (Reuters) – Venezuela and China have amended an oil for credit deal to allow the OPEC nation to pay for oil deliveries faster, without substantially changing the terms of the bilateral agreement. As Mofcom stated in its publication, Venezuela does not have the capacity to increase production in the short term to keep up with the initial terms of the deal. The setback will be another frustration for China in its relations with Venezuela. Venezuela sends 230,000 barrels of oil per day (b/d) to China to repay the A and B parts of the loan, and an additional 100,000 b/d to pay For Part C of the deal, Mofcom said. Venezuela`s state-owned oil company PdV said in its latest annual report that it sent some 550,000 b/d of oil to China last year to repay its loans, up from 480,000 b/d in 2011. PdV sells oil and products at market prices to China to repay its loans, so the recent drop in crude oil prices would have required a sharp increase in exports to China to stop its payments. Instead of imposing explicit secondary sanctions on Venezuelan crude flows, the U.S. imposed restrictions on dollar transactions with PDVSA and kept the oil financing agreements between Venezuela and China and about $7 billion with respect to prepaid crude oil agreements between PDVSA and Rosneft outside the scope of U.S. sanctions.

China has agreed to ease some of the conditions imposed on Venezuela for more than $50 billion in oil-for-credit deals, while the drop in oil prices is smaller, which would force Caracas to increase exports to keep up with its payments. New changes to the oil-for-credit deal have eliminated the minimum oil export requirement and also lifted a three-year repayment period, China`s Ministry of Commerce (Mofcom) said in a brief statement on its website. “Power outages effectively shut down field operations without on-site production as well as upgraders,” said Frank Verrastro, senior vice president of the Energy and National Security Program at the Center for Strategic and International Studies. . . .

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