Russia, Venezuela to form 'strategic' oil alliance

Venezuelan President Hugo Chavez plans to enter into a strategic alliance with Russia aimed at developing his country's oil industry, according to a senior government minister.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Nov. 24 -- Venezuelan President Hugo Chavez plans to enter into a strategic alliance with Russia aimed at developing his country's oil industry, according to a senior government minister.

"It will be a strategic alliance between Petroleos de Venezuela SA (PDVSA) and an oil consortium of all the Russian firms, state and private, a large industrial conglomerate not just for production, but also for the entire matter of refining and industrialization," said Venezuela Energy Minister Rafael Ramirez.

A strategic cooperation agreement will be signed on Nov. 26 during Russian President Dmitriy Medvedev's visit to Caracas, Ramirez said, noting that Moscow also is pursuing a policy "of greater cooperation" with the Organization of Petroleum Exporting Countries.

Earlier this month, Rosneft Chief Executive Officer Sergei Bogdanchikov said five of Russia's largest oil and gas firms each have taken a 20% stake in the national consortium formed to develop heavy oil fields in Venezuela's Orinoco River basin.

The consortium was registered on Oct. 8, Bogdanchikov said. In addition to Rosneft, the Russian group is comprised of Gazprom, Lukoil, TNK-BP, and Surgutneftegaz. PDVSA will have the controlling stake in the larger consortium announced by Ramirez, and the companies will complete formalities by next spring.

Russian Deputy Prime Minister Igor Sechin explained the rationale for the consortium with Venezuela.

"The consortium derives from practical considerations: crude produced at certain Venezuelan blocs is heavy, and it is necessary to build refineries capable of making commercial oil," Sechin said. "Such refineries are rather expensive ($6-6.5 billion), and that is too much for one company."

Contact Eric Watkins at hippalus@yahoo.com.

More in General Interest