Ecuador, China to set up oil joint venture

China’s latest foray into Latin America hit the presses on Thursday when Ecuador announced it would initiate a new joint venture with the China to explore for oil in the South American country.

China’s Sinopec International Petroleum will invest $1 to $1.1 billion to form a joint venture to exploit oil from block with proven reserves of 120 million barrels of crude in eastern Ecuador.  The joint venture will between Ecuador’s state-owned Petroecuador and China’s Sinopec, according to Germanico Pinto, Ecuador’s minister of nonrenewable natural resources.

Sinopec will hold a 40 percent stake in the joint venture, with Petroecuador holding the remaining 60 percent.

Ecuador, OPEC’s smallest oil producing country, can pump out 500,000 barrels of crude each day.

“Sinopec could improve its supply chains through investing in the South American country, because in the past, the company has always concentrated on processing,” Lin Boqiang, deputy director of the China Center for Energy Economics Research at Xiamen University, said Thursday.

“The reserves of 120 million barrels of crude are small, but many countries are eager to invest and explore oil overseas,” he added. “Sinopec has the technical know-how and capital to complete the project.”

Beijing’s direct investment in Ecuador has reached $2.2 billion, making it one of the top targets of Chinese investment in Latin America, Jia Qinglin, chair of the National Committee of the Chinese People’s Political Consultative Conference, told reporters when he was paying a visit to Ecuador.

Trade between the two countries reached $2.4 billion in 2008, a 50 percent increase from the previous year, he said.