Venezuela, Vietnam to Start Producing Orinoco Oil by 2011

CARACAS (Dow Jones), Sept. 29, 2009

Venezuela and Vietnam's state-run oil companies have begun talks aimed at agreeing on a plan to start producing oil together in Venezuela's Orinoco region by early 2011.

"It is expected that within 18 months the crude oil production process will begin," said Eulogio Del Pino, director of exploration and production at Venezuela's state energy firm Petroleos de Venezuela, or PdVSA.

The joint venture company, called Petromacareo, would be 60% controlled by PdVSA and 40% by Vietnam's state firm, Petrovietnam, the Venezuelan government said in a statement Tuesday.

The drilling would occur in the Junin II block of the Orinoco oil belt, with expectations of producing 200,000 barrels a day.

The joint venture firm was already approved by President Hugo Chavez and the National Assembly, the statement said.

In summarizing Venezuela's oil production plans in the oil-rich Orinoco, the government statement said that in addition to a Vietnam joint venture, it aims for 450,000 barrels a day of production from Junin 6, which it plans to develop with a Russian consortium.

It also hopes to produce 400,000 barrels a day from Junin 4 with China National Petroleum Corporation (CNPC); 1.2 million barrels a day from the seven blocks being auctioned in the upcoming Carabobo bidding round; and 200,000 barrels a day in each of the blocks Junin 10, Junin 5, Junin 1 and Junin 11.

As such, Venezuela could boost its overall production capacity by some 3 million barrels a day, to reach more than 6 million barrels a day in "the coming years," the government said.

Despite these goals, observers question how much of a financial commitment some foreign oil firms will be willing to make, given the tricky regulatory environment in Venezuela, which is run by leftist-populist Hugo Chavez. Also, the Orinoco belt's oil is mostly heavy and extra-heavy crude, making it expensive to turn into marketable, lighter crude.  

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