Venezuela's state-run Petroleo de Venezuela (PdVSA) has signed three separate strategic agreements with Italian oil industry major Eni. The freshly inked deals include a contract for the development of the Junin 5 block, in the Orinoco heavy oil belt; a Technology Agreement; and a Memorandum of Understanding (MoU) for the construction of a new power plant. Rafael Ramirez, Venezuelan Oil Minister, said that PdVSA and Eni combined will invest $18 billion.

An initial deal for Junin 5 was previously agreed back in March 2008. Significantly, it is hoped that the Junin 5 agreement could provide a significant boost to Eni's output in the South American nation.

The signing of the latest three agreements is set to further expand Eni's position in Venezuela's upstream segment and will no doubt strengthen its co-operation with the state-backed firm. Eni has been operating in Venezuela since back in 1998 and currently holds three licences that cover a total area of 1,556 square kilometers.

Under the newly signed agreement over the Junin 5 block, PdVSA and Eni will establish a 60-40 joint venture to develop the block. The block covers an area of around 425 square kilometers and is located some 550 kilometers south-east of Caracas. It is designed to hold 35 billion barrels of certified oil.

Under the agreement the two companies plan to start production at the block from 2013, which is slightly earlier than the previously announced start-up date of 2014. From 2013 onwards the joint venture aims to produce 75,000 barrels per day (bpd), with a long-term output target of 240,000 bpd once a new refinery has been constructed in Jose. So far, the Italian major has agreed to bank-roll a $646 million signature bonus.

Tags: Eni Norge AS, PDVSA