Moscow, December 8, 2011.Rosneft and PDVSA today signed a tentative memorandum of understanding to set up a joint venture to develop heavy crude oil reserves in Venezuela as part of the Carabobo-2 project. Rosneft will hold a 40% stake in the planned joint venture with the remaining 60% to be owned by PDVSA subsidiary CVP.
The Carabobo-2 project comprises the Karabobo-2 North and Carabobo-4 West blocks. They are situated in the Orinoco heavy oil belt and have a combined acreage of 342 sq km. The blocks are estimated to hold 40 bln barrels (6.5 bln tonnes) of oil reserves. Commercial oil production is expected to peak at above 400,000 barrels per day (25 mln tonnes a year).
Rosneft is to pay an entry bonus under the terms of the memorandum. The first $440 mln payment is to be made on project approval by the Government and the National Assembly of Venezuela and the signing of an agreement on the establishment of the joint venture. The remaining $660 mln is due after the final investment decision is taken. After gaining all the required approvals from the Government and the National Assembly of Venezuela, Rosneft will extend a market rate $1.5 bln credit facility to PDVSA, under which annual disbursements will be capped at $300 mln.
Once created, the joint venture's operations will cover the whole deposit exploration and development cycle, as well as the construction of surface facilities and field pipelines. There are also plans to construct a special processing facility (upgrader) with a capacity of 200,000 barrels a day (10 mln tonnes a year) to bring extracted oil up to commercial quality. Commercial oil will be transported for export to the Araya port through a trunk pipeline which is to be constructed by PDVSA.
In an unprecedented move for the Venezuelan market, the companies also signed two additional memoranda to set up individual joint ventures to provide drilling and construction services in the Orinoco oil belt.
 “This tentative MOU is a major step in globalizing Rosneft business. If Rosneft joins the project, it will gain access to the rich deposits of the Orinoco oil belt, a resource base that could become an important driver of additional growth in the Company's output after 2015 and transform Rosneft into a major player in this very promising region of Latin America. The papers that were signed today mean Rosneft will also gain valuable technical expertise with heavy oil and secure access to an important platform for developing the Company’s trading business,” Rosneft President Eduard Khudainatov said after the signing ceremony.