Carola Hoyos Will Moscow and Caracas’ ambitious Orinoco plan succeed?

US Geological SurveyVenezuela under president Hugo Chavez has become the poster child of how to maim a burgeoning oil sector. But Caracas’s latest deal — the Juno 6 field, to be developed by Pdvsa and several Russian partners — has some heavy political firepower behind it and may yet lead to new oil production from Venezuela’s Orinoco Belt.

However, there are some rumblings of discontent: sources tell FT Energy Source that Russia’s decision to invest in Junin 6 was made by Vladimir Putin, and handed as a fait accompli to the less-than-thrilled chief executives of Russia’s biggest oil and gas companies.

In fact one source is betting (literally*) that nothing will come of this latest efforts, pointing out how few upsteam oil projects Russian companies have managed to pull off successfully outside their own borders.

The Russian government, for its part, is taking the commitment seriously, if a recent visit to Caracas by Putin is anything to go by. Petroleum Intelligence Weekly reported the details:

The Russian premier presented President Hugo Chavez with documents for the first tranche of a $1 billion loan that allows Russian National Oil Consortium (RNOC) — comprising state Rosneft and Gazprom, as well as privately owned Lukoil, TNK-BP and Surgutneftegas — to set up a joint venture with state Petroleos de Venezuela (PDV). The first tranche totalled $600 million with the rest to be paid by the end of the year. RNOC will hold 40% in the JV with the remaining 60% belonging to PDV. The partners aim to produce 450,000 b/d from the block, and exploration could start next year, according to Surgut head Vladimir Bogdanov. Investment should total $60 million-$80 million this year, he added. The partners aim to approve the 2010 budget and choose the JV’s head, who will come from PDV, within a month.

Venezuela’s energy minister, meanwhile, says the project could start producing up to 50,000 barrels per day by the end of the year. It will be interesting to see whether the sceptics are proved wrong.

[*Said source has in fact bet us 365 sushi dinners; so arguments to the contrary on Russia's record on foreign projects are particularly welcome - use the comments below or email us.]

Related links:

Venezuela secures $80bn of oil investments – FT