For Middle East oil exporters and the global environment, the recent news from Venezuela is not encouraging. China has agreed to lend the biggest South American OPEC producer US$20 billion (Dh73.4bn) to develop the vast ultra-heavy oil resources of its Orinoco Belt. Venezuela will repay the loan with oil. "We agreed on a huge, long-term financing plan," the Venezuelan president on state television. "China needs energy security and we're here to provide them with all the oil they need." He predicted that Venezuela would increase production of Orinoco crude by as much as 1 million barrels per day (bpd) within seven years as a result of $120bn of direct foreign investment. The 25-year agreement that the Venezuelan state oil company , or PDVSA, signed on Saturday with the Chinese state-controlled China National Petroleum Corporation (CNPC) is expected to yield about 2.9 billion barrels of recoverable crude. The deal puts Venezuela, which already ships 460,000 bpd of oil to China, in competition with Gulf exporters to supply the world's second biggest oil consumer. Saudi Arabia and the UAE are among the Arab OPEC states that have also been courting Beijing in the hope of securing markets for more of their crude. The environment could also lose out, because China has agreed to a side-deal with Venezuela to build three thermal power plants with a combined capacity of 900 megawatts that will run on petroleum coke. Petroleum coke, which is almost pure carbon, is a byproduct of oil refining. It is produced in especially large quantities when heavy crude is "upgraded" to a lighter synthetic crude with a lower ratio of carbon to hydrogen in its make-up. The lighter crude gives a higher yield of transportation fuels such as petrol and diesel, and correspondingly less heavy fuel oil and asphalt. But burning coke for electricity produces roughly the same amount of carbon emissions as coal-fired power generation. In terms of capping the level of greenhouse gases in the atmosphere, it is among the least desirable power options. Venezuela is desperate to expand its electricity sector and diversify its energy mix. It has been suffering severe power shortages as a result of relyinge on a single hydroelectric project that has been hit by drought. Nevertheless, the country could instead develop an enormous gasfield it has discovered off its coast to provide fuel for new power plants. Gas is the least carbon intensive of the fossil fuels burnt for electricity generation. Gas-fired plants emit less than half as much carbon dioxide as coal or coke-fired facilities of equivalent capacity. On announcing the big gas discovery last year, Mr Chavez said he had no idea what Venezuela would do with an estimated of the fuel. He has recently updated the reserves estimate to as much as t, but has said nothing about using the gas to generate electricity. China, of course, is an expert at developing power plants that run on solid carbon fuel, as it leads the world in installed coal-fired thermoelectric capacity. The best that can be said of the plants that CNPC plans to build in Venezuela is that they will be more efficient than the older coal-fired plants being decommissioned in the US. The Chinese power distribution monopoly said yesterday that the smart grid planned for China might contribute more than 20 per cent to Beijing's goal of reducing carbon intensity. The government hopes to reduce the amount of carbon dioxide released by unit of GDP by 45 per cent by 2020 from 2005 levels. That is laudable, but China now seems to be exporting carbon emissions to Venezuela in return for oil. That country, not China, will produce the huge amounts of power and heat needed to exploit ultra-heavy crude, and it will do it with carbon-intensive generating plants.