China Eximbank provides loan for Phase 1 of Sinovensa Orimulsion Production Facility Project (Linked to Record ID#38053)

Project narrative

In April 2001, a cooperation agreement for Orimulsión® was signed by Bitumenes Orinoco, S.A. (BITOR) and China National Oil and Gas Exploration and Development Corporation (CNODC), a subsidiary of China National Petroleum Corporation (CNPC). The objective of the agreement was to carry out a series of pre-investments necessary to determine definitively the feasibility of Phase 1 of the Sinovensa Orimulsion Production Facility Project. Then, on December 13, 2001, the National Assembly of the Bolivarian Republic of Venezuela authorized BITOR to establish with CNODC a joint venture called Orifuels Sinoven, S.A. (SINOVENSA). On December 27, 2001, BITOR, CNODC and PetroChina Fuel Oil Company Limited signed a joint venture (association) agreement, establishing SINOVENSA as a legal entity. China Eximbank subsequently issued an overseas investment loan (境外投资项目案例) to CNPC International Ltd. (CNPCI) for Phase 1 of the Sinovensa Orimulsion Production Facility Project. CNPCI, in turn, on-lent the funds from the overseas investment loan to Orifuels Sinoven, S.A. (SINOVENSA)— a special purpose vehicle and joint venture between Bitumenes Orinoco, S.A. (30% ownership stake), China National Oil and Gas Exploration and Development Corporation (40% ownership stake), and Petrochina Fuel Oil Company Limited (30% ownership stake). The borrowing terms of the loan are unknown. However, it is known that CNODC served as the loan guarantor. The purpose of Phase 1, which had an estimated total cost of $360 million, was to construct and operate a bitumen emulsification module to produce Orimulsión® (MPE-3). Another objective was the extraction, exploitation, transportation and industrialization of natural bitumen and associated fluids and the trading of Orimulsión® produced in the installation. The bitumen emulsification module was expected to have an effective production capability of 125 MBD of Orimulsión® (7.25 million of annual metric tons), which would be exported to the electricity generation industry in China. The field and the production facilities were to be located in Cerro Negro and Morichal, southern Monagas State, and the emulsification plant at the industrial complex Complejo Industrial de Jose, Anzoátegui State. As of December 31, 2005, the construction of the facilities at Morichal and the industrial complex Complejo Industrial de Jose reached 82% and 93% completion rates, respectively, and they are expected to be completed during 2006. The SINOVENSA complex was completed in April 2006. However, on December 31, 2006, SINOVENSA suspended the production of Orimulsion® in its complex.