Outside View: Russian-Venezuelan oil pacts

Many analysts expected Venezuelan President Hugo Chavez, who visited Moscow on July 22, to sign new agreements in military-technical cooperation, but this did not happen.

Instead, a number of Russian oil giants signed promising contracts with Venezuela. They would replace their American counterparts, previously ousted by Hugo Chavez.

… The signed agreements make it clear that each of the three Russian companies has staked its own block in the Orinoco oil belt. Thus, LUKoil has received Junin-3 block. In effect, it has extended its three-year contract with PDVSA on the block’s evaluation and certification. The new two-year agreement provides for the block’s joint exploration and development. Once accomplished, the two companies plan to establish a joint venture to develop the deposit. This will require billions of dollars in investment. The oil from this project could then be sent to an oil refinery in Italy. LUKoil has just bought 49.9 percent of its shares.

… The signed agreements are also politically charged because the Russian companies are essentially replacing American oil giants ExxonMobil and ConocoPhillips.

… The Russian-Venezuelan agreements have one more political undertone. Oil imports from Venezuela play a major role in the U.S. oil balance. Out of 10 million barrels of oil imported by the United States every day, 1.2 million — 12 percent — come from Venezuela.

Energy Daily