After hundreds of billions of dollars of oil and gas deals around the world over the last few years, pointedly uncontested by the United States, China is not wasting any time in filling holes left by long detached American diplomacy in Latin America. China has comfortably spread its cash in the region, especially to secure oil in countries eager to break past US dominance, namely Venezuela. And now, in a potential coup de grace, Beijing appears to have found an alternative to the Panama Canal to ship all that crude, a solution that involves Colombia, Washington’s most important regional political and military ally. As it is now Venezuelan crude oil is not very economically attractive to China, with large tankers, incapable to use the Panama Canal, having to circumnavigate Latin America.

Colombian President Juan Manuel Santos said negotiations with China to build a nearly $8 billion dry canal to connect the country’s Caribbean coast to a port on the Pacific Ocean using a railway are “quite advanced.”

“No, it’s real. … There’s a proposal to build a whole railway system that would even connect Venezuela with the Pacific,” Mr. Santos said in an interview published last week in the Financial Times. “We are of course very interested.”

Colombian officials are not prone, unlike firebrand Venezuelan caudillo Hugo Chávez, to making flashy statements, which makes the announcement all the more concerning. It could be that Mr. Santos, a savvy negotiator, is using these talks to pressure the US Congress into approving a free trade agreement (FTA) with Colombia that has been frozen ever since its signing late in 2006.

Republicans the previous week had demanded the Obama administration to act more decisively in seeking Congressional approval of the agreement that US Trade Representative Ron Kirk described as having “serious issues” that need to be resolved.

Santos replied in the interview by ruling out renegotiating and threatened to drop the matter if the deal wasn’t approved this year. “We will look for other markets. There is life without the FTA.”

There certainly is, and China, armed with a $2.7 trillion war chest, is on the prowl. The world’s second biggest, but galloping, economy secured deals in Latin America in 2010 worth at least $65 billion for varying stakes in projects that could eventually produce over 1.3 million barrels of crude oil a day and 750,000 barrels per day of refined products. It also leased a 5 million-barrel storage facility in the Caribbean.

That does not include cash-for-oil swaps signed in the past with Venezuela, Ecuador, and Brazil, or long-term oil supply contracts. Chinese purchases this year alone secured a minimum supply of nearly 600,000 barrels per day, which today would account for about 15% of China’s total imports. More importantly, it gives China solid traction to expand in the future in Latin America, with the world’s second biggest reserves after the Middle East.

Most Chinese investment has been in Venezuela. Chávez in December said “All the oil that China needs for the rest of this century is underneath Venezuelan soil.” Half a million barrels a day are exported currently and the target is to double in the not too distant future. The US currently imports just under 1 million barrels per day from Venezuela, around 10 percent of US crude imports.

Chinese companies last year signed deals worth $40 billion to extract as much as 800,000 barrels a day of the Orinoco Belt in Venezuela. This is an area that in the past was dominated by US multi-nationals. A refinery with 200,000 barrels per day capacity will be built in Venezuela and a Chinese company will start refurbishing and expanding a Cuban refinery with 150,000 barrels per day capacity with a Chinese loan that is underwritten with Venezuelan oil.

A dry canal is nothing short of the last step for China in securing a major energy conduit of South American oil to China, with refining included, at the expense of the US, which will be increasingly hard pressed to secure its oil flow.

In fact, China is positioning itself not just to supply its ever growing oil thirst, but also to become a major player in oil and product trading market in the American and Asian continent with its deals in Latin America.

With a President that is openly hostile to oil, calling it “old energy” in his recent State of the Union Address, the Obama administration seems totally mute in its reaction towards the Chinese moves in what was considered America’s back yard. All indications leave no doubt that China will become the new continental oil king in Latin America.