MercoPress. South Atlantic News Agency

Venezuela-Uruguay sign 25 year oil deal

Venezuela will guarantee Uruguay's oil supply for the next 25 years as part of an energy deal that also includes providing fuel to other countries in the region.

"We are going to support our Uruguayan brothers and the government of President Tabare Vazquez; we are determined to broaden our relations and do business together", said President Chavez Wednesday in Montevideo following the signing of several joint bilateral accords.

A Venezuelan vessel carrying one million barrels of crude is already en route to Montevideo and Chavez promised that Venezuela will immediately invest the 40 million US dollars of the bunker in projects in Uruguay.

These include 18 million US dollars in the upgrading of a government owned cement plant which will then provide Venezuela with cement under favorable conditions for President Chavez administration housing programs.

The remaining twelve million are to be invested in refurbishing a sugar cane alcohol plant which will export to Venezuela the so called "green fuel".

Uruguay imports all the oil it consumes, approximately 50,000 barrels a day and Venezuela is the world's fifth-leading oil exporter and fourth US supplier.

Presidents Vázquez and Chavez also announced work had started on a "strategic alliance" to drill for oil in Venezuela's so-called Orinoco strip.

"Uruguay's contribution to the joint exploration will not entail funds, but technicians and expertise" indicated Mr. Chavez.

Venezuela's government owned oil company PDVSA is interested in refining heavy oil in Uruguay's only refinery strategically located in the south Atlantic coast. PDVSA plans are to expand the refinery and export fuel to energy short Mercosur members.

The project involving several hundred million US dollars would double the refinery's capacity to 100,000 bpd adapting it to the heavy sulfur Venezuelan crude.

"The technical, legal, market and option studies will take six months. If the decision is made to build a new plant, it will take at least five years of work and more than 600 million US dollars" admitted Uruguay's oil company president Daniel Martinez.

President Chavez second leg of his Southern cone visit begins early morning Thursday in Argentina.