Venezuela and China, the world's fastest-growing major economy, will form a joint venture to produce oil in Venezuela's Orinoco Belt to supply a new 400,000-barrel-a-day refinery they will build in China.

    The venture between Petroleos de VENEZUELA SA and China National Petroleum Corp will pump oil from an area called Junin 4, where CNPC has quantified reserves, President Hugo Chavez said at a signing ceremony in Caracas late on Friday, Bloomberg News reported.

    China is securing long-term energy supply deals around the world to satisfy its growing needs.

    Chinese oil consumption will rise 5.3 percent this year, the International Energy Agency reported in January. Demand rose 6.6 percent in 2006, according to the most recent BP Statistical Review.

    "This isn't about an immediate advantage," said Pedro Benitez, a professor of political economy at Central University of VENEZUELA and oil consultant. "It's more about the political economy of China. It's to maintain a commercial relationship."

    Zhou Jiping, vice president of CNPC, and Venezuelan Energy and Oil Minister Rafael Ramirez, who is also president of the state energy company known as PDVSA, signed the agreement.

    Venezuela is diversifying its energy markets to reduce reliance on the U.S., its biggest customer. The country sends 300,000 barrels a day to China, Chavez said. Venezuela sent 12,300 barrels a day in 2004, before President Hugo Chavez said it was a priority to increase sales to the Asian nation.

    Two company board members said the new refinery won't use Orimulsion, the boiler fuel that Venezuela used to sell at a price much cheaper than its usual price for oil. Days earlier, a PetroChina executive said it would use the low-cost oil. But "Orimulsion is dead," said del Pino.

    Asdrubal Chavez, head of refining, commercialization and supply for the state oil company, said the same thing when asked if Venezuela was restarting shipments, which halted at the end of 2006. He said that while Venezuela intends to ship an average 400,000 barrels a day to China this year, none will be the low-cost oil.