Sept. 26 (Bloomberg) -- Russia and Venezuela agreed to create a joint oil company that will invest ``tens of billions of dollars'' to develop fields in Latin America and beyond, Russian Energy Minister Sergei Shmatko said.

Petroleos de Venezuela SA, or PDVSA, will be joined in the venture by Russian oil companies OAO Gazprom, OAO Rosneft, TNK- BP, OAO Lukoil and OAO Surgutneftegaz, Shmatko said, speaking after a meeting between Russian President Dmitry Medvedev and his Venezuelan counterpart Hugo Chavez in the southern Russian city of Orenburg.

Chavez, on his second trip to Russia since July, was offered closer nuclear cooperation and a $1 billion loan to buy weapons during a visit with Prime Minister Vladimir Putin in Moscow yesterday. Russia, which is conducting joint military exercises with the South American country, is forging closer ties amid worsening U.S. relations with the two energy exporters.

The company will seek to control the entire processing chain of oil and gas, both onshore and offshore, Chavez said today in a live phone call to state television. He used a similar call yesterday to call the new company a ``colossus.''

The agreement describes a joint company that will explore, pump, refine, transport, supply and ship oil by sea, as well as own refineries in nations not party to the agreement, Chavez said. A bi-national bank will finance the activities and Russian companies will provide Venezuela with technology related to gas, oil-equipment factories and refinery-development, he said.

Russian Expansion

Russian energy producers are already expanding abroad, including in Venezuela, where Gazprom and Lukoil are exploring fields in the Orinoco Belt. PDVSA, primarily operating at home, is also seeking expansion. Before heading to Russia, Chavez agreed in China to build refineries and boost oil exports. In 2006 he pledged to form a global oil venture with Iran, with little progress since then.

Venezuela will control the new oil company, Shmatko said, adding that a draft agreement will be ready for submission to both countries' governments by the end of October. The Russian producers will likely participate on an equal basis, according to Shmatko.

``We're going to work in Cuba, Bolivia and other countries,'' he said. ``I think the geography could later be expanded.''

Gazprom Chief Executive Officer Alexei Miller signed a memorandum of understanding with Venezuelan Energy and Oil Minister Rafael Ramirez in Orenburg today.

Gazprom will probably head the group of Russian companies involved in the project, Miller said. Gazprom, Russia's largest energy company, has already invested more than $100 million on exploration in Venezuela, he added.

The new venture, to be based in Caracas, may be allowed to work in Venezuela's Carabobo region, Shmatko said.

Spokesmen for Gazprom and Rosneft said it was too early to provide any details of the project. Spokespeople for TNK-BP and Lukoil weren't immediately available to comment.

To contact the reporters on this story: Lyubov Pronina in Orenburg, Russia, via the Moscow newsroom at lpronina@bloomberg.net; Lucian Kim in Moscow at lkim3@bloomberg.net

Last Updated: September 26, 2008 20:22 EDT