Exclusive: Venezuela sees $5.5 billion new Orinoco funds.

Venezuela expects Chinese and Italian banks to provide new loans totaling $5.5 billion this year to develop joint venture projects in the vast Orinoco extra heavy oil belt, the energy minister said on Thursday.

Venezuelan Energy Minister Rafael Ramirez told Reuters the funds would go to projects being developed with China's CNPC and Italy's Eni (ENI.MI), and that early production from the Orinoco region was due to begin this year.

"We're going to sign a deal with CNPC for $4 billion ... for our development with them," Ramirez said in an interview.

"On my last visit to Vienna I met (Paulo) Scaroni (CEO) of Eni and we agreed financing of $1.5 billion for our development of the Junin 5 block," he said.

"We continue to put a lot of emphasis (on the Orinoco belt) and we are working to convert it into great center of industry, of services," Ramirez added.

The South American OPEC member has signed deals with several foreign companies for Orinoco projects that are slated eventually to add 2.1 million barrels per day of new production and bring some $80 billion in investment.

Run by state oil company PDVSA, the projects are mostly set to begin producing tar-like Orinoco crude by 2012. Upgraders to turn that into lighter oil will be ready several years later.

Ramirez said joint venture oil projects in other parts of the country would not be funded by further PDVSA bond issues, even though they need funds to increase production.

U.S. SANCTIONS ON PDVSA

The United States imposed sanctions on PDVSA last month in a bid to starve Iran of fuel, prompting warnings from Venezuelan President Hugo Chavez's government.

Officials in Caracas have defiantly celebrated their country's close links with Tehran.

The sanctions were largely symbolic because they did not limit the company's oil sales to the United States and other markets, and Ramirez said Washington had made a mistake.

"The United States has made a mistake with the sanctions. It has shot itself in the foot, attacking a country that has been strategic for them," he said, adding that spot sales of oil to the United States amounting to about 300,000 bpd were now being redirected to Europe.

Separately, Ramirez said the government was happy with the increased tax revenue it receives after it boosted tax rates on some windfall oil income in April.

"We are very satisfied and relaxed, knowing that we will have this money available," the minister said, adding that the tax hike would not affect the development of new projects.

(Writing by Daniel Wallis; editing by Carol Bishopric)

Source: Reuters