Company News

Venezuela approves Chinese role in Orinoco oil block

 * Aims to produce 400,000 bpd from Junin block 4
 * Deal is for 25 years, can be extended another 15
 CARACAS, Oct 11 (Reuters) - Venezuela has formally approved
China's involvement in a joint venture to tap 400,000 barrels
per day (bpd) of oil from Junin block 4 in the South American
OPEC member's vast Orinoco extra heavy crude belt.
 President Hugo Chavez's government signed a raft of deals
with foreign companies this year to set up several Orinoco
projects that are slated to add 2.1 million bpd of new
production and bring Venezuela some $80 billion in investment.
 Its state oil company PDVSA holds a 60 percent stake in
each project. China National Petroleum Corp has a 40 percent
interest in Junin block 4, where production is expected to
start at 50,000 bpd in 2012 and reach its maximum by 2016, when
a new upgrader in the area is due to begin work. Factbox:
 "The joint venture will produce up to 400,000 bpd of extra
heavy crude ... for a period of 25 years from the start of
operations," said an agreement between PDVSA and CNPC published
on Monday in the Venezuelan government's Official Gazette.
 It said CNPC would pay a $900 million bonus fee in eight
tranches, the first to be delivered once Venezuela has given
the joint venture the legal right to exploit the area. It was
not immediately clear when that would happen.
 The deal can be extended for a further 15 years if both
parties meet the agreed investment plan, the Gazette notice
said, and there is a tax relief provision if those investments
fail to be recouped from production in seven years.
 China's rapidly growing economy is hungry for access to
energy resources around the world, and diplomatic ties between
Caracas and Beijing have expanded quickly in recent years. That
includes increasing cooperation outside the oil sector.
 Last month, Venezuela said a Chinese firm would refurbish
the country's main port. China also built and launched a $400
million communications satellite for Venezuela in 2008,
reducing its dependence on U.S. and European satellites.
 In addition, the Chavez government has bought Chinese radar
equipment to monitor its borders, and Beijing provided it with
military training jets after Washington imposed an embargo in
2006 on sales of U.S. weapons parts to Venezuela.
 Other companies with interests in Venezuela's Orinoco belt
include Chevron CVX.N of the United States, Italy's Eni
ENI.MI, Spain's Repsol REP.MC and a Russian consortium of
Rosneft ROSN.MM, Gazprom GAZP.MM, Lukoil LKOH.MM, TNK-BP
TNBPI.RTS and Surgutneftegaz SNGS.MM.
 (Writing by Daniel Wallis; Editing by Dale Hudson)