Japan May End $1.5 Billion Venezuela Loan Plans After Seizures


By Steven Bodzin and Shigeru Sato

June 23 (Bloomberg) -- Japan may cancel a planned $1.5 billion loan for
Venezuela's El Palito and Puerto La Cruz oil refineries after the South American
nation seized Japanese company assets, said a person familiar with the
situation.

The Japan Bank for International Cooperation, or JBIC, is reviewing loans for
the upgrades after Venezuela took over Japanese iron and chemicals assets and
fell behind on payments to oil-service contractors, according to the person, who
declined to be identified because the review isn't public. The refineries have a
combined 327,000 barrels-a-day of capacity.

Venezuelan President Hugo Chavez is risking as much as $33.5 billion in Japanese
investment as he takes over plants owned by companies such as Tokyo-based
Mitsubishi Corp. Petroleos de Venezuela SA, the state-owned oil company, is also
behind on payments to contractors including Japan's Toyo Engineering Corp.,
according to the person.

"If that money were to dry out they'd be in a serious pinch," said Roger Tissot,
a consultant with Gas Energy Latin America in Vernon, British Columbia. "It
doesn't matter if you're from China, Japan, Saudi Arabia or Wall Street, you
want your money back and a little bit of return."

Nippon Export and Investment Insurance, or Nexi, is also considering ending
coverage for projects in Venezuela, the person said. The agency insures most
Japanese holdings in Venezuela. The company has been holding internal meetings
to determine its insurance coverage policy for Japanese investments in
Venezuela, Kyoichi Suzuki, the head of the agency's country risk analysis group,
said by phone June 19.

PDVSA Head

Rafael Ramirez, Venezuela's oil and energy minister and president of PDVSA, as
the state oil company is known, didn't immediately respond to a request for
comment sent to his communications office. Satoshi Matsui, director general of
Toyo in Venezuela, declined to comment on PDVSA payments in an e- mailed
response to questions.

"We have grave concerns about Venezuela's nationalization of the industries and
need to continue internal discussions before determining our clear future
policy," Suzuki said.

Planned Japanese investments in Venezuela include $10 billion in liquefied
natural gas projects, $8 billion in petrochemicals and $1.5 billion for the
refineries, Chavez said while visiting Japanese Prime Minister Taro Aso in
April.

Japanese companies could lose their appetite for investing in the South American
country without Nexi coverage because they would fully be exposed to any
investment risks, said Hidetoshi Shioda, a senior energy analyst at Mizuho
Securities Co. in Tokyo.

Continued Negotiations

JBIC, through a spokesperson who wouldn't be named because of company policy,
declined to comment on any review of the loan because negotiations are still
ongoing. Venezuela's Foreign Ministry didn't immediately respond to a call and
e- mailed questions from Bloomberg News seeking comment.

Mitsubishi, Mitsui & Co. and Itochu Corp. are among the partners designing two
liquefied natural gas plants where Ramirez said Japanese investment may reach
$10 billion.

In 2007, JBIC led a group of banks including Mitsui and Marubeni Corp. that
loaned PDVSA $3.5 billion to be paid in cash, crude oil or petroleum products
over 15 years, according to PDVSA's annual report.

Nationalization

Venezuela has nationalized two industries with Japanese investment this year.
Chavez took over the hot briquetted iron industry May 22, including Complejo
Siderurgico de Guayana CA, or Comsigua, where shareholders include Kobe,
Japan-based Kobe Steel Ltd. and Tokyo-based Marubeni Corp.

The Latin American nation's legislature passed a law June 16 to take over
primary and intermediate chemicals plants, such as the Metor methanol plant
where Mitsubishi Gas Chemical Co. and Mitsubishi, both of Tokyo, share a
majority stake.

PDVSA is at least $5 billion behind on payments to contractors, with several
complaining that they have received only token payments since August.

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