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. Last Updated: 07/27/2016

Chavez Invites In Russian Oil Firms

ReutersVenezuelan President Hugo Chavez examining a replica on Friday of a Tu-160 strategic bomber as Prime Minister Vladimir Putin looks on in Orenburg.
Venezuelan President Hugo Chavez agreed Friday to give broad access to his country's oil riches to five Russian companies, Russian Energy Minister Sergei Shmatko said.

The deal came after a meeting between President Dmitry Medvedev and Chavez in Orenburg, where the Venezuelan leader reiterated his support for Russia's actions in last month's military conflict with Georgia.

It also came a day after the announcement of a $1 billion loan for Venezuela to buy Russian military hardware.

State-controlled Gazprom and Rosneft, as well as private companies Lukoil, TNK-BP and Surgutneftegaz, plan to pour "tens of billions of dollars" of investment into Venezuela, Shmatko said.

The Russian and Venezuelan energy ministries signed a memorandum of understanding Friday that calls for the Russian companies to link up in a consortium to form a joint venture with Venezuelan state oil company Petroleos de Venezuela SA, or PDVSA, Shmatko said.

"It is a colossus being born," Chavez said live on Venezuelan state television from Russia.

Venezuela is the fourth-largest supplier of crude to the United States. It holds 7 percent of the world's proved oil reserves, Gazprom said.

This visit was the second for Chavez, a fervent critic of the United States, since July, as relations with the two energy-rich nations appear to be on the rise after Russia drew scathing criticism from the West over the brief war with Georgia and its subsequent recognition of the independence of the breakaway Georgian regions of South Ossetia and Abkhazia.

Chavez said Venezuela fully supported Russia in the conflict.

"We know how the peaceful people of South Ossetia were attacked," he said. "Our support may be modest, but it is full and firm."

Chavez did not, as some had expected, follow Russia's lead in offering official recognition of South Ossetian and Abkhazian independence. Nicaragua remains the only country to have joined Russia in the move.

Prime Minister Vladimir Putin offered the $1 billion military loan at a meeting with Chavez on Thursday and said Russia might work on the development of nuclear energy in Venezuela.

Russia sent two Tupolev-160 strategic bombers on a training mission to Venezuela this month and is planning joint naval exercises there in October.

The joint oil venture, in which PDSVA will have a majority stake, will also look beyond Venezuela at countries like Cuba and Bolivia, Shmatko said.

"I think the geography could be expanded later," Shmatko said, Interfax reported.

Regardless of where it operates, it will seek to control the business, from exploration and the development of fields to refining and the sale of petroleum products, he said.

The firms in the Russian consortium might hold equal stakes, but no final decision had been made, Shmatko said.

Gazprom chief Alexei Miller said Gazprom was likely to lead the consortium because it had been working in Venezuela since 2005, when it won a license for offshore gas exploration at two fields.

Earlier this month, Gazprom and PDVSA agreed to join forces in a project to explore and produce gas at another offshore field.

As Medvedev and Chavez watched Friday, Miller and Venezuelan Oil Minister Rafael Ramirez signed a broader memorandum of understanding envisioning cooperation on developing fields, building infrastructure, producing oil and gas and refining, Gazprom said in a statement.

The memorandum also lists transportation of hydrocarbons, exploration and evaluation of reserves, production of liquefied natural gas and field services, including drilling and well maintenance, as areas of joint interest, Gazprom said.

LUKoil, Russia's second-largest oil producer, also has experience working with PDVSA. The companies began working together on the exploration of the Junin-3 block near the Orinoco River in 2005, a project that was extended during Chavez's July visit.

On Friday, Medvedev and Chavez discussed the possibility of forming a gas cartel, Miller said without elaborating.

Russia, Venezuela and Iran are the main backers of turning the existing Gas Exporting Countries Forum into a more influential organization but have said the entity would not seek to fix prices.