Venezuela Looks to Develop Orinoco Block with Petrobras

CARACAS, Aug 12, 2005 (Dow Jones Commodities News via Comtex)

Venezuela plans to develop a block of its Orinoco tar belt with Brazil's Petrobras (PBR), the latest step in a campaign to improve regional economic integration, President Hugo Chavez said early Friday.

"We want to exploit it together, PdVSA and Petrobras," said Chavez, referring to state-run Petroleos de Venezuela S.A. (PVZ.YY).

"That field alone has 50 billion barrels in reserves," Chavez added in televised comments to reporters as he arrived in Brazil for an official visit.

Venezuela is looking to ramp up Orinoco heavy oil production in the coming years, and is turning to state-run companies in the region to help out. Earlier this week Chavez struck a similar deal with Uruguay's state-run Ancap energy company. Chavez also said he offered an Orinoco block to Argentina during a Thursday official visit, but did not elaborate.

PdVSA and Petrobras will begin technical studies on the project soon, said Chavez, who will hold meetings with his Brazilian counterpart Inacio Lula da Silva Friday.

Venezuela has said it will begin selling 27 new exploration blocks in the Orinoco as soon as PdVSA finishes calculating the oil reserves in each area.

Venezuela currently has four projects that upgrade Orinoco tar oil into more than 500,000 barrels a day of marketable synthetic crude. Six major oil firms are involved in producing and upgrading the crude oil through joint ventures with PdVSA.

Venezuela claims Orinoco holds 235 billion barrels of oil reserves and plans to add these to its 78 billion barrels of conventional oil reserves to surpass Saudi Arabia as the world's largest nation in reserves.

Venezuela is the world's fifth largest oil exporter and a major supplier to the U.S.

Copyright (c) 2005 Dow Jones & Company, Inc.