Russia, Venezuela announce Orinoco tie-up

3-Feb-2010

Russia and Venezuela will be collaborating to extract oil from Venezuela's massive Orinoco field, Venezuelan president Hugo Chavez said on Tuesday.

Russian oil majors Lukoil, Gazprom, TNK-BP, Rosneft and Surgutneftegaz will hold 40 percent of the development rights to the Junin 6 block of the Orinoco, Chinese news service Xinhua reported. Venezuelan state oil firm PDVSA will own the other 60 percent.

The Orinoco's oil stocks are massive: The U.S. Geological Survey estimates that recoverable Orinoco reserves total 513 billion barrels. But, unlike light, sweet crude from the Middle East, Orinoco oil is heavy and requires more effort to process.

Russian oil companies - which do not subscribe to the production quotas set by OPEC - are awash in cash thanks to oil prices near $80 per barrel. And with taxes on domestic oil profits likely by 2012, according to the Russian Finance Ministry, Russian majors are looking elsewhere for investment opportunities.

In Iraq's oil rights bidding in December, for example, Lukoil won the rights to the coveted West Qurna Phase 2 field. Lukoil and Norwegian firm Statoil will earn $1.15 for each barrel they produce above current levels.

Breaking news brought to you by the Oxford Princeton Programme, specialists in oil courses. This and other related topics are part of the forthcoming course Overview of and Opportunities in Latin American Crude Oil on 14-15 June, 2010 in Rio de Janeiro.