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Total to invest £15 billion in Venezuela

Source: Reuters - Wed 23rd Sep 2009

France's Total and Venezuela will invest $25 billion (15 billion pounds) to develop an oil field in the Orinoco region, part of the OPEC member's plan to greatly increase output in a decade with the help of foreign investors.

Already among the world's top oil exporters, Venezuela has announced $61 billion investments in recent weeks to develop its vast tar-like crude reserves, with large projects being assigned to allies China and Russia.

Venezuela's state oil company PDVSA said in a statement on Tuesday that Total's investment in the Junin 10 field included the construction of an oil refinery or upgrader to turn the extra heavy crude into exportable oil.

Oil Minister Rafael Ramirez said that over the next 10 years Venezuela would produce an extra 3.05 million barrels per day. Venezuelan output is currently disputed, but the government says it produces around 3 million bpd.

"It is a reality that this natural resource is running out" on a global level, he told reporters. "Faced with that reduction we are making previsions to be able to supply the world's oil and gas requirements."

Some analysts doubt Venezuela's production goals - it had previously aimed to pump 6 million bpd by 2012.

Venezuela was hard hit by a months-long oil strike that started in 2002 and its output has been disputed ever since.

Socialist President Hugo Chavez nationalized many large crude projects two years ago and set tough investment rules. 

Chavez has handed out dozens of oil fields, many to state run firms from diplomatic allies, but until recently the firms were limited to registering reserves on their blocks.

Now, PDVSA is looking to rapidly develop the Orinoco region, which Chavez sees as key to Venezuela's future growth.

The companies invited will be obliged to spend a total of $26 billion on social projects, Ramiez said.

"If the transnationals come and say they don't want to take part in building housing or highways then let them do business wherever else they can find reserves", Ramirez said.

In recent weeks Venezuela has announced a joint venture with a consortium of Russian companies worth $20 billion at the Junin 6 field and another $16 billion project with China.

PDVSA did not give a time frame or production estimate for the project with Total. The French company already works with Venezuela in a joint venture, pumping crude in an Orinoco region project that the government took majority control of during a wave a nationalizations in 2007.

Ramirez also said he will meet next week with firms interested in bidding for the Carabobo oil blocks in the Orinoco belt. The auction was delayed earlier this year as lower oil prices made some companies balk at the costs associated with developing the blocks.

Ramirez said in August that Venezuela aimed to finish the bidding by the end of this year in what would be the first such oil tender in socialist-run Venezuela for a decade.

Companies interested include BP, U.S.-based Chevron, China's state-owned CNPC, Colombia's Ecopetrol ECO.CN, Italian ENI and Portugal's Galp Energia. 

The Carabobo project aims to build three upgraders to turn the Orinoco belt's tar-like crude into oil for exports and produce around 200,000 barrels per day, with the initial investment seen between $10 billion and $20 billion per area.

Ramirez said that in the Junin fields, where foreign firms are forming joint ventures with state company PDVSA, the medium-term goal is to produce 1.85 million bpd.

Adding expected output of 1.2 million bpd from the Carabobo project, that would raise the medium-term goal for the whole Orinoco region to 3.05 million, he said.

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