China signs letter of intent to redo Cuba refinery

* China to expand refinery in Cienfuegos, Cuba

* Project expected to cost $6 billion


HAVANA, (Reuters) – China signed a letter of intent to refurbish a Cuban oil refinery and agreed to give new credit and start drawing up a five-year cooperation plan between the two communist-run countries in accords signed Sunday during a visit by Chinese Vice President Xi Jinping.

The agreement on the refinery was the first official word on a project first reported by Reuters in November that is expected to cost $6 billion and would be a significant step forward in budding Cuba-Chinese economic relations.

The signing of the accords followed talks between Xi and Cuban President Raul Castro on Xi’s second day in Cuba after arriving Saturday from Italy.

XI is widely expected to succeed Chinese President Hu Jintao in 2013.

Few details about the credit and other agreements were available.

China is Cuba’s second largest trading partner, behind Venezuela, with trade last year totaling $1.83 billion, according to official Chinese news agency Xinhua.

The refinery letter of intent is an agreement among Cuvenpetrol, which is a joint venture between Cuba and Venezuela, China National Petroleum Corp’s Huanqiu Contracting and Engineering unit and the Italian unit of French oilfield service company Technip to finalize a contract to expand and improve a Soviet era refinery in Cienfuegos on Cuba’s southern coast.

The plan would expand the refinery’s capacity to 150,000 barrels per day, from 65,000, and is a key part of Cuba’s plans to develop its still untapped oil fields in the Gulf of Mexico.

A separate letter of intent between Cuvenpetrol and Huanqui calls for them to complete a contract to build a liquefied natural gas project that would include a regasifcation plant.

Reportedly, the plant would be built at or near the refinery.

China’s Eximbank is expected to fund the refinery and LNG projects, with backing from Venezuelan oil.

China has become the lender of last resort for debt-ridden Cuba, which is carrying out reforms to modernize and strengthen its Soviet-style economy.

Last year, China restructured debt believed to be as high as $4 billion and agreed to extend new credit in what Havana-based diplomats said was a show of support for Cuba’s reforms.

China increased its trade with Latin America by 50 percent in 2010, to $180 billion, Xinhua said.

Xi is scheduled to leave Cuba Tuesday and go on to Uruguay and Chile.