Russia and Venezuela will be jointly producing 50 thousand barrels of oil a day by the end of this year. The agreement was announced as Caracas officials prepare Fridays visit by Prime Minister Putin.

After a year of talks Russia and Venezuela are setting up a joint venture to drill for heavy crude in the Junin 6 field. Venezuelan Vice President, Elias Jaua, says all that is left to finalise details.

“We are rapidly advancing on the front of creating a joint company to explore in oil areas as well as the strategic alliances for oil services and facilities.”

The Junin 6 project worth an estimated 20 billion dollars will be run by Petroleos de Venezuela holding a 60% stake, with the rest owned by a consortium of five Russian oil producers; Gazprom, Rosneft, Lukoil, TNK-BP and Surgutneftegaz.

The proven reserves of the oil field located in the vast Orinoco belt are estimated at 53 billion barrels. The plans are to extract 50 thousand barrels of oil per day this year, with a nine-fold increase to 450 thousand barrels per day in about 5 years.

But to do so, Mikhail Krutikhin, Partner at Rusenergy says outside help is necessary.

“For Venezuela it's a good opportunity to have an international consortium of experienced oil companies to finance the project It's good especially in view of Venezuela's relationship with the US and with American companies who have abandoned that country.”

For Russian companies it could also be a lucrative project though Krutikhin adds there are also political risks of getting involved in this Latin American country.

“We all remember the experience of Russian companies in Iraq, they signed a lot of contracts there and when the regime fell they had to renegotiate contracts from square one.”

A first tranche of $600 million out of an agreed total of $1 billion from the Russian consortium for the right to take part in the venture will go to Venezuela this week. As will Mr Putin, who is likely to be shaking a lot of hands as the deal is sealed.