China’s cash advances to Ecuador cover only a slice of the near $13 billion a year Ecuador can earn from oil sales. But since 2009 PetroEcuador has agreed to sell Chinese firms several hundred million barrels of oil, valued far higher than the loans themselves, according to a Reuters analysis of seven different contracts. With those supplies locked up, other buyers now get few chances to purchase crude from PetroEcuador in competitive tenders.
http://www.financialpost.com/m/wp/i...ting/how-china-took-control-of-ecuadors-oil-2
Both the central government and state company Petroecuador ran into severe budgetary constraints, and China provided loans. As a result, the country’s oil export revenues came under Beijing’s aegis.
Thereafter, the Chinese would allow the export of Ecuadorian crude anywhere. Aside from the production it controlled from projects like the one being run by Sinopec, however, the play had morphed from moving the transit flow back home. Instead, loan repayments took the revenue flow from Ecuador and siphoned it back to China.
What resulted was the first time an OPEC member relinquished control over its own financial life line.
A new strategy was evolving to use finance as a better way of orchestrating broader global oil trade. Similar moves subsequently took place in Brazil, Peru, and especially in Venezuela, where the next stage of a Chinese policy expansion is unfolding. Venezuela now owes Beijing over $50 billion.
Sources confirm that the Chinese are not prepared to provide a long grace period unless export crude from Venezuela continues to be priced at less than $50 a barrel. Above that point, Beijing will require the introduction of a sliding scale, eroding the advantage to Caracas of the payment suspension.
However, the imposition of such a scale is still some way off. PDVSA contacts acknowledge that its oil is usually set at a 25% discount to Dated Brent. That would put the current price at about $37 a barrel.
http://energycapitalresearchgroup.com/ecrg-intelligence/china-holds-the-leverage-on-venezuelan-oil/