Venezuela only paid the interest on $19 billion in loans from China for the past two years. Some sources say the outstanding debt is $23 billion and other reports $50 billion in loans.
Venezuela sent 700,000 barrels per day of crude and fuel to China through bilateral agreements, according to a Reuters review of PDVSA trade documents.
Only around 70,000 barrels per day were applied to debt service under the grace period arrangement. China paid for the remainder in cash. Oil was $50 per barrel in 2017. This means China bought about $11.5 billion in oil from Venezuela and Venezuela paid $1.28 billion in interest in 2017.
Without the grace period, the amount applied to debt service rises to 375,000 bpd. China will take 28% of Venezuela’s 1.34 million barrel per day oil production. Venezuela will not get cash but would have to send oil for about three years to pay off the debt.
Venezuela Oil Production Keeps Falling
Venezuela’s oil production dropped by another 47,500 barrels per day (bpd) in June, compared to a month earlier. Venezuela’s oil production has fallen 800,000 barrels per day from the same time in 2017. Oil Workers are quitting and taking equipment and trucks when they leave. This is causing oilfield shutdowns. Total production dip will be below 1 million barrels per day (mb/d) within months.
If Venezuela oil production completely collapses then China would not be able to collect.
China is considering a $250 million investment and even a $5 billion bailout. However, it is clear those levels of investment will not be enough to turn around the collapse in Venezuela. For each 100,000 b/d per year of production increase, about $4 billion per year in additional investment would be required.
However, China’s investment money could be enough to stabilize the newer joint venture oil fields at 1 million barrels per day. China would have to take control of the fields in order to ensure their production.