Brazil, Venezuela work on refinery plans

SUAPE, Brazil - The presidents of Venezuela and Brazil pressed forward Friday with plans to build a shared oil refinery at this Atlantic port, vowing to bolster South America's neglected infrastructure.

Venezuelan President Hugo Chavez and his Brazilian counterpart Luiz Inacio Lula da Silva laid the cornerstone Friday for 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 - and the growing regional influence of the visiting Venezuelan president. Chavez, an outspoken critic of U.S. foreign policy, said South America must unite to overcome the underdevelopment he blamed on "imperialism of the North."

"They took our wealth and left us with poverty," Chavez said. Venezuela is now "looking South," and the refinery is part of its continental development plan.

Analysts say the joint construction project shows how South American nations are increasingly building the infrastructure needed to do business directly with each other.

"We'll spend 10 billion, 20 billion dollars, but we're going to integrate South America," Silva told a cheering crowd of about 2,000. Many wore red T-shirts saying, in Portuguese, "The refinery is ours."

Silva said he advised Chavez to have "more patience and more dialogue" to avoid conflicts with U.S. President George Bush, a favorite target of the Venezuelan's fiery rhetoric against U.S.-style capitalism.

Chavez blamed high oil prices on the lack of refineries and on capitalism. "Refining oil is not a very lucrative business; the profit margin is small. Voracious capitalism goes always after the maximum profit and very few want to invest in refineries. But investments should not be oriented only by profit but also by the needs of development and of lowering costs," he said, speaking to reporters after the ceremony.

The refinery in Brazil is the first to be built in this country in 30 years.

Chavez paid a short visit to a town 20 miles off Recife named after Jose Inacio Abreu e Lima, the Brazilian hero after whom the refinery also will be named.

Abreu e Lima fought along with Venezuelan hero Simon Bolivar for independence from Spanish colonial rule. Chavez reveres Bolivar and calls his leftist-populist government a "Bolivarian revolution."

With construction slated to start in 2008, the Jose Inacio Abreu e Lima refinery will process 200,000 barrels of oil daily to produce diesel fuel, naphtha - a solvent used to make petrochemicals and fertilizers - and other oil products.

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 nation and largest economy.

The refinery in Suape, located 1,180 miles northeast of Rio de Janeiro, also is seen as a major technological challenge. It will process thick oil-based tar from fields in the Orinoco belt that must be upgraded to make it "refinable."

That's why oil giants Petroleos de Venezuela and Brazil's Petrobras also have plans to build a $1billion preprocessing plant to upgrade the Orinoco's extra-heavy oil by some 10 API degrees, an American Petroleum Institute measurement of oil density, into refinable crude.

Construction of the preprocessing plant is expected to start in 2006, according to Petrobras. It would begin operation in 2009 or 2010.