China offers $20-billion loan to Venezuela

China will provide soft loans worth $20 billion to Venezuela for the development of the Latin American nation's energy sector, Venezuelan president Hugo Chavez said Saturday.

The deal indicates strengthening of ties between the fast-growing Asian economy and the oil-rich Latin American nation primarily targeting the development of Venezuela's oil reserves in the vast Orinoco basin.

''All the oil that China needs for its growth and consolidation as a power is here,'' Chavez said at a ceremony in Caracas, announcing the loans. Both the nations signed a series of agreements for cooperation in the oil and power sectors.

Detailed terms of the loans are not yet available. According to the official Chinese news agency Xinhua, the $20 billion soft loans to Venezuela's energy sector will be provided through the China Development Bank.

Chavez said the new loan was on top the existing $12 billion Chinese-Venezuelan investment fund in which China deposits money in return for forward sales of oil. Venezuela badly needs funds to boost its economy which contracted 3.3 per cent in 2009.

Under the agreements, a joint venture between the state-owned oil companies of both the countries (China's CNPC and Venezuela's PDVSA) will be formed for exploitation and processing of heavy crude oil from the Junin-4 block of the Orinoco basin. It is expected that production from the field could reach around 400,000 barrels per day.