July 12 (Bloomberg) -- Venezuelan oil shipments to the U.S. fell 6 percent in the first four months of the year as President Hugo Chavez followed through on his plan to find new markets for his crude, according to data from the U.S. Energy Department.

State-run Petroleos de Venezuela SA has been sending more tankers of oil and fuel to India and China, markets that are up to seven times more distant than the U.S. customers that traditionally take most of the country's exports. Venezuela was the third-biggest OPEC producer last month, with output of about 2.6 million barrels.

``Two things are clear,'' said Roger Tissot, an oil analyst with PFC Energy, a consulting firm in Washington. ``Venezuela wants to reduce its dependence on the U.S., and it wants to position itself in the world's fastest growing markets, such as India and China.''

Chavez, 51, is shouldering higher transportation costs that reduce the country's proceeds by up to $3 a barrel. Record global oil prices help make up for lost revenue. The Venezuelan strategy may make short-term supply disruptions more likely in the U.S. and provide fodder for critics of the Chavez government who say he is an unreliable oil provider.

The U.S. Senate Foreign Relations Committee met last month to discuss Venezuela's reliability as an oil supplier. A report by the General Accountability Office, the non-profit research arm of Congress, said a six-month loss of Venezuelan crude would raise oil prices by $11 a barrel and reduce U.S. gross domestic product by $23 billion.

Unreliable Partner

Senator John McCain, who ran against President George W. Bush for the Republican presidential nomination in 2000, said earlier this year that the U.S. needs to develop alternate energy suppliers to avoid being held hostage by Chavez and other foreign leaders who control oil supplies.

``We better understand the vulnerabilities that our economy and our very lives have when we're dependent on Iranian mullahs, and whackos in Venezuela,'' McCain said in a Jan. 22 interview on Fox News Sunday.

Venezuela sent 178.2 million barrels of crude and petroleum products to the U.S. for the first four months of 2006, down from 190.1 million barrels for the same period in 2005.

Venezuela is usually one of the top four suppliers of crude oil and fuel to the U.S., according to Energy Department figures. In some months the country sends more to the U.S. than Saudi Arabia. The top four suppliers include Mexico and Canada, and the order of the rankings change month by month.

Venezuela has signed new supply agreements with China, India, Jamaica, Haiti, Paraguay, and Bolivia. The country's output is not growing because of a lack of investment in new production, so supplies to those countries come at the expense of the exports to the U.S.

Oil to China

``In the past, all of our oil went north,'' Chavez said during a June 23 press conference in Panama. ``We didn't send oil to Argentina or Uruguay or Paraguay. Now, our oil is arriving at the Rio de la Plata,'' which separates Argentina and Uruguay.

Venezuela is particularly targeting Asia. Petroleos de Venezuela signed a long-term sales agreement with India in April for 2 million barrels a month. The company is also in talks with Reliance Industries Ltd., India's largest non-state oil refiner, for additional shipments.

Sales to China have steadily risen. They totaled 14,000 barrels a day in 2004, and 80,000 barrels a day last year.

``By the end of this year, we should be sending 300,000 barrels a day of oil to China,'' Chavez said. China, which exported crude oil as recently as the early 1990s, has become the world's third-largest oil importer.

Petroleos de Venezuela said in May that it planned to buy 18 oil tankers from Chinese shipyards at a cost of $1.3 billion to allow for increased shipments to Asia.

Worsening Relations

Since taking office in 1999, Chavez has repeatedly said the U.S. is seeking to overthrow his government. U.S. leaders including Secretary of State Condoleeza Rice have called Chavez a destabilizing force. The U.S. cut off arms sales to the South American country earlier this year.

The U.S. ``depends on us, not we on them,'' Chavez said in a May 16 interview with the U.K.'s Channel 4. Chavez warned that oil prices would soar to $100 a barrel if Venezuela chose to send its oil to China, Europe and other countries instead of the U.S.

``It looks like Chavez is laying the groundwork for cutting off oil to the U.S.,'' said James Williams, an analyst with WTRG Energy Economics in London, Arkansas. ``And the only people who will benefit from this are tanker owners.''

So far, Chavez doesn't have the ability to abruptly suspend sales to the U.S. without damaging his own economy. Petroleos de Venezuela would be unable to find buyers for most of the 2.1 million barrels of crude oil it exports today, said Juan Carlos Sosa, president of Grupo Petroleo YV, a Caracas-based energy consultant. Potential customers, including China, don't have sufficient capacity to process the most common Venezuelan crude oil grades, he said.

Heavy Crude

``Chinese refineries can't process Venezuelan crude, which is heavy in metals and sulfur,'' said Sosa. ``Chinese refineries are still geared toward lighter crudes,'' such as those produced by Nigeria, the sixth-biggest producer in the Organization of Petroleum Exporting Countries.

Building the refinery units needed to handle cheaper, stickier, high-sulfur crude oil from Venezuela will take years, Sosa said. In the U.S. some refineries have been upgraded specifically to handle Venezuela's output.

Sales to Asia also make more sense if and when Venezuela builds a pipeline to the Pacific across neighboring Colombia. Such a pipeline, which would cost up to $4.7 billion, would shave nearly 10 days off the trip to China, making crude sales more economical.

Most supertankers can't fit through Panama Canal, forcing them to go around South America to reach China after loading at Caribbean ports.

``A pipeline to the Pacific is the only way selling oil to China would make any economic sense,'' said Williams. ``Then again, Chavez makes decisions time after time that make no sense economically.''

To contact the reporter on this story: Peter Wilson in Caracas at pewilson@bloomberg.net.

Last Updated: July 12, 2006 11:09 EDT