China will lend Venezuela $20bn and form a venture to pump crude from an Orinoco Belt block, Venezuela President Hugo Chavez said.

The financing from China is separate from a $12bn bilateral investment fund, Chavez said, reports Bloomberg.

Venezuela’s state-owned Petroleos de Venezuela SA (PDVSA) and China National Petroleum signed a joint-venture agreement in Caracas to pump and refine heavy crude oil at the Junin 4 block of the Orinoco Belt.

Venezuela, the largest oil producer in Latin America, currently sends 460,000bpd of crude oil to China, the world’s second-biggest oil user.

The agreement, valid for 25 years, will see another 400,000 barrels of oil from Venezuela, increasing China’s oil imports by about 10%.

China National Petroleum expects about 2.9 billion barrels in extra heavy crude oil production from the joint-venture, the majority of which will be owned by PDVSA.

President Chavez wants to invest $120bn in the Orinoco Belt in Eastern Venezuela in the next seven years to increase daily production by one million barrels.