Venezuela PdVSA to Invest $2B Into Tricolor Project

CARACAS (Dow Jones Newswires), July 29, 2011

Venezuelan oil giant Petroleos de Venezuela, or PdVSA, will invest $2 billion into its Tricolor Project in the Orinoco heavy oil belt this year, company officials said Thursday. The money will go toward raising output from 23,000 barrels a day to 146,000 barrels daily in the Junin, Carabobo and Ayacucho blocs by year's end, PdVSA Chief Rafael Ramirez and company Vice President Eulogio del Pino told reporters.

South America's largest oil producer is expected to invest around $18 billion this year and is counting on major advances in its Orinoco projects, where much money will be needed to convert the region's tar-like heavy oil into a usable and exportable commodity.

President Hugo Chavez relies on revenue from vast oil reserves to fund the major social programs that have supported his popularity, especially among the country's poor.

Still, Venezuela has struggled to increase output during his 12 years in office, which critics have partly attributed to insufficient investment into the sector. According to its audited 2010 annual report published earlier this week, PdVSA invested just over $13 billion into various projects last year.

The company aims to raise it's total crude production levels to 4 million barrels daily by 2015, from around 2.7 million.

In recent months, PdVSA has been on the receiving end of some good news as the International Energy Agency revised its accounting method for Venezuelan oil production, leading to an increase in the agency's estimates. Also, earlier this month the Organization of Petroleum Exporting Countries reported that Venezuela's proven crude-oil reserves surpassed those of Saudi Arabia in 2010, making the South American country the holder of the world's largest oil reserves.

Still, questions remain over how and when the country will be able to secure the nearly $80 billion it expects to need for developing the Orinoco projects.

Copyright (c) 2011 Dow Jones & Company, Inc.

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