Oil report

UPDATE 3-Putin bolsters oil, defense ties with Venezuela

* Chavez wants nuclear energy, space technology

* Venezuela beefing up defenses with Russian arms

* Russian companies to produce oil from Orinoco belt

* Putin also meeting Bolivia’s Morales (Recasts, update with meeting)

By Darya Korsunskaya and Anthony Boadle

CARACAS, April 2 (Reuters) - Russian Prime Minister Vladimir Putin visited Venezuela on Friday to discuss oil, defense and nuclear energy cooperation with Latin America’s main leftist foe of the United States, President Hugo Chavez.

They were to launch a $20 billion venture between Russian firms and Venezuelan state company PDVSA to pump 450,000 barrels a day -- almost a fifth of the OPEC member’s current output -- from the vast Orinoco heavy oil belt.

Putin’s 12-hour visit provides a welcome lift for Chavez, who is facing domestic and international criticism for failing to solve Venezuela’s economic woes and attempting to silence opposition to his 11-year rule.

Putin was later to hold talks in Caracas with Bolivian President Evo Morales, along with Chavez the fiercest opponent of what they call U.S. “imperialism” in Latin America.

Chavez said Moscow and Caracas would strengthen security ties to “continue increasing Venezuela’s defense capability” and move ahead with cooperation on nuclear energy.

“We are not going to build the atomic bomb but we will develop nuclear energy for peaceful purposes. We have to prepare for the post-petroleum era,” Chavez said on Thursday.


FACTBOX on Russia-Venezuela ties [ID:nN02139874]

FACTBOX on Venezuelan political risks [ID:nRISKVE]


Facing a national electricity crisis that has caused widespread outages, Chavez’s government is turning to Iran and Russia for help to develop nuclear power.

Venezuela, South America’s top oil exporter and a major U.S. supplier, has expanded military ties with Russia under Chavez, who says the United States could attack Venezuela for its oil reserves.

Since 2005, Venezuela has bought $4 billion worth of Sukhoi jet fighters, Mi-17 helicopters and Kalashnikov assault rifles. Chavez received more than $2 billion in loans for more Russian arms during his eighth visit to Moscow in September, including T-72 tanks and the S-300 advanced anti-aircraft missile system. [ID:nLA719656]

U.S. Secretary of State Hillary Clinton expressed concern last year that the Russian weapons purchases by Venezuela could trigger an arms race across Latin America. [ID:nN1571529]

Chavez says his growing arsenal is aimed at countering a planned increase in the U.S. military forces at bases in neighboring Colombia, Washington’s closest ally in the region.


A Russian Beriev amphibious plane to fight forest fires arrived on Thursday to help extinguish blazes that have ravaged the drought-scorched Avila mountain overlooking Caracas.

The highlight of Putin’s visit will be the rolling out of the joint venture to develop the Junin 6 field in the Orinoco, which will require $20 billion in investments over 40 years.

Venezuela expects the venture to begin producing 50,000 barrels a day by the end of the year. [ID:nN31225561]

The Russian consortium involved in Junin 6 are state giant Rosneft ROSN.MM, private major Lukoil LKOH.MM, Gazprom GAZP.MM, TNK-BP TNBPI.RTS and Surgutneftegaz SNGS.MM.

PDVSA holds a 60 percent stake in the project, and Caracas says the Russian firms will pay Venezuela a first tranche of $600 million on Friday -- out of an agreed total of $1 billion -- for the right to take part in the venture.

To boost its sagging output from traditional wells, Venezuela needs foreign investment and technology to tap the heavy oil of the Orinoco belt that requires much upgrading to turn into lighter crude.

Putin’s first visit to Venezuela is seen as part of an effort by Moscow to help Russian firms expand abroad and own oil assets all over the world.

Industry sources said Rosneft, Russia’s largest oil producer, was seeking to buy stakes in four German refineries from Venezuela as part of the Kremlin’s drive to encourage its companies’ activities abroad. [ID:nLDE6301C]

Rosneft said on Friday it was in talks with PDVSA, but that there were no proposals to acquire its German assets.

Chavez hopes Russian cooperation will reach as far as the space industry. “We could even install a satellite launcher,” he said on Thursday. (Additional reporting by Dmitry Zhdannikov in Moscow; Charlie Devereux in Caracas; Editing by Daniel Wallis)