Brazil and Venezuela build first joint oil refinery

Venezuelan President Hugo Chavez and his Brazilian counterpart Luiz Inacio Lula da Silva laid the cornerstone Friday of a $2.5 billion refinery that will process heavy crude from Venezuela's huge Orinoco Belt and Brazilian offshore fields. The refinery won't come online until 2011, but it's already a symbol of the converging geopolitical and economic interests of both countries, as well as Chavez' growing regional influence. Analysts say the joint construction project also shows how South American nations are increasingly building the infrastructure needed to do business directly with each other.

About 2,000 people attended the stone-laying, many wearing read T-shirts saying, in Portuguese "the refinery is ours." Venezuela, the world's fifth-largest oil producing nation, would guarantee a market for at least 100,000 barrels daily in Brazil, South America's biggest and richest nation. This new market will be far from Venezuela's traditional buyers in the United States and Europe, analysts note, and Brazil benefits not only by creating thousands of jobs in its poor northeast region, but also by securing refining capacity for the heavy crude oil from its offshore Marlim field, near Rio de Janeiro.

"If it doesn't hurt Brazil, as it seems it doesn't, why not?", said Alexandre Barros, of Brasilia-based Early Warning analyst group. "If Brazil can profit from business with its neighbors, so much the better." The Jose Inacio Abreu e Lima refinery will produce diesel fuel, naphtha and other oil products. The joint venture coincides with other efforts in Brazil's drive to improve South American integration with roads, railroads and bridges as a way to boost continental trade.

Early this week, Silva visited Colombia and signed agreements to build roads to improve links and increase bilateral trade between the two countries. Similar agreements have been signed with Bolivia and Peru, as Brazil seeks new trade routes to the Pacific Ocean and Asia.

The refinery in Suape, an Atlantic port 1,180 miles (1,900 kms) northeast of Rio de Janeiro, is also seen as a major technological challenge. It will process thick, heavy oil-based tar from fields in the Orinoco belt that must be upgraded to make it "refinable", reports the AP. N.U.