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Russia's Rosneft to Lead Junin-6 Oil Project in Venezuela

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Oil giant OAO Rosneft (ROSN.RS) will become the leader of a Russian consortium that runs the Junin-6 oil block in Venezuela, a project being developed in partnership with state energy monopoly Petroleos de Venezuela, or PdVSA, a spokeswoman for the Russian company said Tuesday.

PdVSA will remain the majority shareholder, with 60% of the project, Venezuela Oil Minister Rafael Ramirez explained in a press conference held in Caracas with Rosneft President Igor Sechin, who led a delegation of Russian executives to the South American country.

Rosneft agreed last week to buy out another Russian company's stake in the National Oil Consortium, a group of Russian companies that holds a 40% stake in the project in Venezuela's Orinoco Belt. Rosneft now owns 40% of the consortium, while OAO Lukoil Holdings (LKOH.RS), OAO Gazprom Neft (SIBN.RS) and TNK-BP each hold 20%.

The venture aims to produce 450,000 barrels a day at peak production in 2018.

Separately, Rosneft is buying TNK-BP from BP PLC (BP, BP.LN) and its partners in deals worth $55 billion.

Mr. Sechin said that with new acquisitions of PdVSA's Russian partners, Rosneft will begin the creation of a new headquarters in Caracas to oversee projects in Venezuela and around the region.

On Tuesday, PdVSA signed memoranda of understanding with its Russian counterparts to explore offshore gas and oil projects, as well as possibly draft a supply deal for oilfield drills. Mr. Ramirez said that PdVSA immediately needs three drills and the idea is to eventually get more from Russian parties.

"Russian companies are taking a strong interest in Venezuela," said Mr. Sechin. In turn, Mr. Ramirez called the Rosneft executive "a friend of the country."

Russian energy companies are involved in Venezuelan projects that currently account for 230,000 barrels a day. As part of its ambitious plans to drastically raise crude output in coming years, Venezuela's Oil Ministry expects its Russian joint ventures to start pumping out a total of 930,000 barrels a day by 2019.

The plans will require $46.9 billion in investment over the next six years, of which $17.6 billion will come from the Russian partners, Mr. Ramirez said.

"We're going to finance this in a direct way," Mr. Sechin told reporters, adding that he didn't have preference for seeking financing from Russian or foreign banks.

Mr. Sechin is slated to meet with Venezuelan Vice President Nicolas Maduro and Foreign Minister Elias Jaua during his stay, Mr. Ramirez said. The Russian delegation will also be evaluating plans to invest in Venezuela's gold-mining industry, which the local government is planning to develop through a recently formed state mining company, the minister said.

As Washington's top critic in the region, Venezuelan President Hugo Chavez has aimed to strengthen commercial and political ties with Russia, leading to increased Russian involvement in the South American nation's oil industry. Venezuela has also purchased Russian fighter jets and weapons.

Copyright (c) 2012 Dow Jones & Company, Inc.

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