China and Venezuela signed an agreement to set up three oil refineries to process petroleum imported from the South American country, the Chinese Ministry of Commerce quoted from Venezuelan President Hugo Chavez recently.

The Venezuelan President also said his country would export 350,000 barrels of crude oil to China later this year. China Petroleum & Chemical Corporation (Sinopec) and China National Petroleum Corporation (CNPC), two of the largest domestic oil companies, have no comment on the issue.

Yang Wei, an analyst from Guotai Junan Securities, said that it is possible for the two countries to set up oil refineries in China in order to lower industry costs for petroleum, especially as the price difference between light and heavy crude oils widens. "The only problem for the project is logistical," Yang said. "Compared with the Middle East region, the transportation route from Venezuela to China is much longer: it transverses the Panama Canal and across the entire Pacific Ocean. So, it's not hard to imagine added costs due to transportation."

More benefits would be generated if the two sides could operate oil tankers together, added Yang Wei.

For more details, please read the full story in Chinese (http://www.china-cbn.com/s/n/000004/20080222/020000071791.shtml).

(China.org.cn February 22, 2008)