Japan, PDVSA Sign $1.5 Billion Loan to Expand Refineries

Petroleos de Venezuela SA, the state oil company known as PDVSA, received a $1.5 billion loan to expand two refineries from a group of banks led by the Japan Bank for International Cooperation.

The 15-year loan, with an interest of 3.8 percent above Libor, is repayable in cash or oil, Energy Minister Rafael Ramirez said today at a ceremony in Caracas. Should PDVSA opt to repay the loan in oil, Mitsubishi Corp. (8058) and Itochu Corp. (8001) will handle the sales, he said.

Venezuela, where refinery output has been hurt by outages this year, will use the funds to expand processing at the El Palito refinery to 280,000 barrels a day from 140,000 barrels, Ramirez said. The Puerto La Cruz refinery will be upgraded to process 210,000 barrels a day from its current capacity of 180,000 barrels.

“Both refineries are being upgraded to process heavy crude from the Orinoco heavy crude belt," Ramirez said. ‘‘We’re adapting to our production reality for the next 100 years.’’

PDVSA has been sending about 2 million barrels of oil a year to Japan to repay a 2007 loan for $3.5 billion, according to the Asian nation’s embassy in Caracas.

To contact the reporter on this story: Jose Orozco in Caracas at jorozco8@bloomberg.net; Nathan Crooks in Santiago at ncrooks@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net