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20:14 GMT +3 hours20 December 2014
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Rosneft, PDVSA Subsidiary Sign JV Agreement on Carabobo

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Russia’s largest state oil company Rosneft and Corporation Venezolana del Petroleo (CVP) - a subsidiary of Venezuela’s state oil and gas company PDVSA - have signed an agreement to establish a joint venture to develop the Carabobo 2 bloc in the southern Orinoco extra-heavy crude belt in Venezuela.

Russia’s largest state oil company Rosneft and Corporation Venezolana del Petroleo (CVP) - a subsidiary of Venezuela’s state oil and gas company PDVSA - have signed an agreement to establish a joint venture to develop the Carabobo 2 bloc in the southern Orinoco extra-heavy crude belt in Venezuela.

The Russian company’s share will be 40 percent.

The two companies also signed a memorandum of understanding, an agreement on Rosneft paying a bonus of $1.1 billion and a deal to issue a $1.5 billion loan to CVP for five years.

The documents were signed by Rosneft CEO Igor Sechin and Venezuelan Oil Minister, PDVSA chief Rafael Ramirez in the presence of President Hugo Chavez.

The bonus will be paid in two installments: $440 million within ten days after the establishment of the joint venture, and the rest after Rosneft makes the final decision on the project.

The loan will be provided in tranches of not more than $300 million annually at the annual interest rate of LIBOR+5.5 percent.

The bloc’s reserves total 6.5 billion metric tons of crude.

Sechin said on Thursday Rosneft will invest $16 billion in the project to develop the Carabobo 2 bloc.

Commercial oil production at the bloc is expected to hit 400,000 barrels per day.

Rosneft is also one of several Russian oil companies that have formed a consortium to develop the Junin bloc 6 of the Orinoco belt in Venezuela.