Venezuelan, Russian Firms in Energy Pact

By ALEXANDER KOLYANDRJuly 23, 2008;

LONDON -- Three Russian energy companies signed deals Tuesday with Petróleos de Venezuela SA, or PdVSA, as Venezuelan President Hugo Chávez visited Moscow.
Mr. Chávez has been holding talks with President Dmitry Medvedev, Prime Minister Vladimir Putin and several top managers of Russian corporations. The leaders also sketched plans for military, aviation, transport and space cooperation.
The agreements, which set no production or sales targets, focus on exploration of Venezuela's Orinoco basin, with one of the richest oil deposits in the world. Last year, Mr. Chávez nationalized four multibillion-dollar projects in the region that had begun in the 1990s.
OAO Gazprom will jointly conduct an evaluation of the Ayacucho-3 block with PdVSA, Gazprom said. It also said it is interested in developing a liquefied-natural-gas project in Venezuela.
Lukoil Overseas, a subsidiary of OAO Lukoil, signed a two-year agreement on joint study of the Junin-3 block. Lukoil Overseas signed an agreement with PdVSA in 2005 on the quantitative assessment and certification of heavy-oil reserves at the block and started exploration drilling in December 2006.
Anglo-Russian joint venture TNK-BP Ltd., embroiled in shareholder conflicts, signed a joint-study agreement on the Ayacucho-2 block.
Analysts say there is more politics than business in the agreements. "It's rather difficult to underestimate the significance of the agreements, judging by Lukoil's rather modest progress in Venezuela," said Pavel Kushnir of Deutsche Bank in Moscow. He said Lukoil signed its first agreement with PdVSA almost three years ago but still has yet to nail down a final deal.
"It looks like a political decision to show that there is genuine energy cooperation between the two countries, but the economic effect of the deals looks rather minor at the moment," he said.
Write to Alexander Kolyandr at Alexander.Kolyandr@dowjones.com