China and Venezuela have signed a $16-billion investment deal to raise oil output in the South American country, Venezuelan President Hugo Chavez said on Wednesday.

Chavez said the investment by China, spread over three years, would go toward developing heavy oil resources in the Orinoco River belt.

The move comes shortly after Venezuela signed a similar agreement with Russia estimated at $20 billion.

The two deals will boost oil production in Venezuela by about 900,000 barrels per day, said Chavez.

China National Petroleum Corp (CNPC), the country's largest oil and gas producer, is now participating in the development of heavy oil resources in the Orinoco belt.

The company yesterday declined to comment on the deal.

One source with the company had earlier told China Daily that it would accelerate the development of oil and gas assets overseas, including the Middle East, Africa and South America.

CNPC President Jiang Jiemin said in May that the company would strengthen cooperation with national oil companies in resources-rich countries such as Kazakhstan, Venezuela and Qatar.

The company expects to see sizable and sustained growth in its overseas operations in the next eight to 10 years, he had said.

"With rich oil resources, Venezuela is important for China's energy strategy," said Xia Yishan, an expert at the China Institute of International Studies. "Venezuela, along with Brazil, is important for China to increase energy cooperation in South America."

China has a sound relationship with Venezuela, which has helped the two countries cooperate on the energy front, said Xia.

Before 2000, China's oil imports were mainly from the Middle East. However, it is now making efforts to diversify its oil imports to enhance energy security, he said.

CNPC has been present in Venezuela since 1997. In May 2008 it entered into two agreements with Venezuelan state oil company Petroleos de Venezuela SA, under which a joint venture was established to drill for super-heavy oil at Junin-4 block in the Orinoco belt.

The annual production target of the joint project, in which CNPC has a 40-percent stake, is 20 million tons, CNPC said on its website.

Another joint venture refinery, in which CNPC will have a 60-percent stake, will be built in China, said the company.

Besides the Orinoco belt, CNPC is now also involved in the development project of the Caracoles and Intercampo oilfields, a joint-venture Orimulsion development project, and the development and joint-venture operation of the Zumano Oilfield.

Chavez visited China in April and met with China's leading oil companies CNPC and Sinopec to seek financing for oil projects.

Statistics showed that Venezuela sent an average of 385,000 tons of fuel oil each month to China in the first half of 2009, up from the previous record of 380,000 tons a month in the first six months of 2007.

China has now become the world's second largest oil importer. At present, the Middle East, Africa and Asia Pacific are the three main regions for Chinese oil imports.

According to a recent report by the Chinese Academy of Social Sciences, 64.5 percent of the country's oil consumption was likely to be met by imports in 2020.

China's State-owned companies have successfully made seven acquisitions of overseas oil and gas assets, cumulatively worth 82 billion yuan, so far this year, CNPC said in a recent report.

(China Daily September 18, 2009)