The China Signal - July 4
Ecuador delays oil shipments to PetroChina, new lithium deal in Argentina, corruption allegations in Guyana
G’day, and welcome to The China Signal. This week, protests in Ecuador delay oil shipments to PetroChina, a new lithium partnership is struck in Argentina, a VICE Media documentary alleges Chinese investment and corruption in Guyana, plus more. Read on.
Oil 🛢️ + ESG 🏞
Ecuador 🇪🇨
Ecuador activates force majeure clause for export of crude oil | China.org.cn | June 30, 2022
*China.org is a state-backed media outlet.
Ecuador’s oil sector has been mired in domestic strikes, leading to 1.8 million barrels of lost production, and the activation of a force majeure clause by Petroecuador on June 28 to ban exports. The clause is expected to be lifted by July 7, according to Petroecuador. Exports to PetroChina are expected to be delayed.
The protestors, led by the Confederation of Indigenous Nationalities of Ecuador (CONAIE) and supported by student groups and labour unions, demand the government freeze fuel prices, cease new oil and mining exploration, and guarantee sectors of the economy won’t be privatised, according to a ten point list of demands publicised by CONAIE.
Background: PetroChina Company Limited (“Petrochina”) 🔍
Founded in 1999, PetroChina Company Limited (“Petrochina”) is a Chinese state-owned oil and gas producer and distributor. It is headquartered in Beijing. Petrochina is listed at the Hong Kong, New York (in both cases since 2000), and Shanghai (since 2007) stock exchanges respectively.
Its parent company is state-owned China National Petroleum Corporation (“CNPC”, see TCS April 23 backgrounder), ranked 21st on Fortune’s Global 2000 2022 List with revenue of over US$380 billion. (RP)
~Article above is in Spanish~
Petrochina, China's largest state-owned oil company, has proposed to Ecuador to access larger volumes of oil as part of ongoing renegotiations to their bilateral debt-for-oil agreement.
The current agreement, struck under the Correa administration, commits delivery of a further 84 million barrels of oil to Petrochina by 2024. This agreement has been criticized as “the biggest oil corruption scheme” Ecuador has had, with reports of bribes to Petroecuador officials, and the contract’s oil price being set well below international market value, resulting in losses of approximately $4.8 billion to the Ecuadorian government (see TCS April 4 for further background).
Under current arrangements, explained former Ecuadorian Finance Minister Mauricio Pozo, when receiving a new shipment of oil, China deducts a percentage to pay the residual due credit. Another portion is transferred to Petroecuador to cover the value of the oil shipments.
According to the article, a new long-term contract would allow Ecuador to extend the terms of the current credits with China. Petroecuador is also pushing for their oil to be delivered to Asian refineries, instead of being sold freely or to intermediaries.
Critical Minerals ⛏
Argentina 🇦🇷
~Paraphrased translation~
Ultra Lithium Inc. executed an agreement with Chinese firm Zangge Mining Investment on June 20 for the exploration and development of its Laguna Verde Lithium Brine Project in the province of Catamarca, Argentina.
Under the terms of the agreement, Zangge will pay US$10 million to Ultra Lithium to invest US$40 million in the Laguna Verde Project as construction costs for a 65% interest in Ultra Argentina S.R.L. (Ultra Argentina).
The investment is subject to regulatory approvals and due diligence.
Zangge Mining Investment is a wholly-owned subsidiary of Zangge Mining Co., Ltd., a lithium and potash producer listed on the Shenzhen Stock Exchange with a market capitalization of US$8 billion.
Zangge Mining is headquartered in the city of Golmud in the Chinese province of Qinghai, and is the largest private potash producer in China, with an annual output of two million tons of potassium chloride, according to its website.
Corruption 🧳🤝
Guyana 🇬🇾
Last week’s celebrations of China and Guyana’s 50th anniversary of bilateral relations were overshadowed by a new VICE Media documentary, which covered Guyana’s worsening corruption and its ties to Chinese investment. In a press conference commemorating the 50th anniversary, China’s Ambassador to Guyana Guo Haiyan dismissed the documentary as “malicious”, intended to “smear the Chinese companies here and attack the China-Guyana cooperation.”
Guyana’s score in Transparency International’s Corruption Perception Index fell 2 points in 2021 following years of moderate gains.
We also recommend the Americas Society’s 2022 Capacity to Combat Corruption Index, which shows countries like Argentina, Brazil, Mexico, and Guatemala with a moderate worsening in corruption, while Costa Rica, Chile, the Dominican Republic, and Paraguay improving. (IA)
Infrastructure 🚇
Colombia 🇨🇴
Primer vagón del Metro de Bogotá fue enviado desde China | El Colombiano | June 29, 2022
~Article above is in Spanish~
On Wednesday June 29, Chinese firm CRRC Changchun - parent company of CRRC Corporation Limited (see TCS May 13 backgrounder) - sent its first rail car of the Bogotá Metro. Construction for the metro line began in August 2021(see TCS August 18, 2021), and is expected to start operating by 2028. (RP)
