Russian Companies to Invest $17.6 Billion in Venezuela

Russian oil companies will invest $17.6 billion in Venezuela by 2019 and quadruple output, expanding cooperation to offshore areas and oil services, said the petroleum minister of South America’s largest oil producer.

OAO Rosneft (ROSN), Russia’s state-run producer, has signed a preliminary deal for the second phase of the Mariscal Sucre gas project off the coast of Venezuela, which will produce 600 million cubic feet a day of gas and 20,000 barrels a day of condensate, oil minister Rafael Ramirez told reporters in Caracas today.

In 2011 Venezuela entered a joint venture with Russian banks as the ruling socialist party sought to replace private oil investment with bilateral deals with allied governments such as China and Russia. Projects with Russian oil companies in Venezuela will produce 930,000 barrels a day by 2019, four times the current volume, said Ramirez.

“We’ll finance the works with loans from Russian banks and credit lines from international banks,” Rosneft Chief Executive Officer Igor Sechin told reporters in Caracas today with Ramirez.

Rosneft will assume leadership of the the Russian consortium developing the heavy-oil Junin 6 block after buying out the stake held by OAO Surgutneftegaz. (SGGD) Petroleos de Venezuela, known as PDVSA, will continue to operate the block with a 60 percent stake, Ramirez said.

PDVSA, based in Caracas, will also create a joint company with Russian partners to assemble drilling rigs in Venezuela, following a model established with Chinese oil companies, said Ramirez.

Other Russian oil companies operating in Venezuela include OAO Lukoil and OAO Gazprom Neft.

To contact the reporters on this story: Corina Pons in Caracas at crpons@bloomberg.net; Anatoly Kurmanaev in Bogota at akurmanaev1@bloomberg.net

To contact the editor responsible for this story: James Attwood at jattwood3@bloomberg.net

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