BELARUS NEWS AND ANALYSIS

DATE:

26/03/2010

Venezuela and Belarus Close to Increasing Crude Export Pact

Venezuela and Belarus are closing in on the inking of an oil supply agreement, which would secure Belarus' energy future and help diversify Venezuela's export network. The agreement is part of Venezuelan President Hugo Chavez's plan to reduce his country's export dependence on the US market. With the economic downturn hitting demand for oil in the US hard, Venezuela's export industry has felt the full impact.

Following a meeting with his Belarusian counterpart, President Alexander Lukashenko, Chavez commented the two countries were close to signing a contract that would see the South American nation supply the former Soviet satellite state with as much as 80,000 barrels per day (bpd) of crude oil.

Interestingly, the agreement will open up the opportunity for a spike in output from an existing Belarusian oil venture in Venezuela's Orinoco province. The plan is for crude oil to be refined at the site in Orinoco before being shipped on to European customers.

The need to increases exports to places such as Belarus is driven by political instability. The ever-colourful Chavez has repeatedly threatened to cut off Venezuela's supply of crude oil to the US, despite America being the country's most lucrative export market.

Whether this will happens or not, Chavez and Venezuela are indeed busy expanding their import routes under the long-term export plan. In particular, in recent months, the President has pursued a series of supply deals with overseas consumers in Asia - namely China and Japan.

In April of last year, the Venezuelan government announced the inking of a deal to increase its crude oil exports to China to 1 million barrels per day (bpd) by 2012. The aim for Venezuela is to become China's biggest supplier of crude, and when this target is reached it shall be. It is fair to assume that this spike in oil export will divert directly from supplies formerly intended to be consumed by the US.

One immediate benefactor from this shift in strategy will no doubt be the global shipping industry. Long-distance crude transfers mean that Venezuela will likely have to increase the size of its shipping fleet, in order to export the supplies from South America to Asia.

Source:

http://www.oilvoice.com/n/Venezuela_and_Belarus_Close_to_Increasing_Crude_Export_Pact/5682165d5.aspx


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