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The Associated Press/CARACAS, Venezuela
Associated Press Writer

Chavez proposes to expand oil alliance

SEP. 29 2:41 P.M. ET Venezuelan President Hugo Chavez said Thursday he is seeking to share his country's oil wealth with every nation in South America, aiming to strengthen ties while offering an alternative to the U.S.-backed Free Trade Area of the Americas.

Chavez says his "Petroamerica" initiative is intended to reach countries across the hemisphere, and that Venezuela has ample reserves to help the region deal with high oil prices for generations to come.

"With this mission of energy integration, Venezuela guarantees petroleum and gas for the South American continent for at least 200 years," Chavez said as he arrived for a South American summit in Brazil's capital of Brasilia.

Chavez said Venezuela and Brazil will jointly exploit an oil block in the Orinoco tar belt, and that further deals were planned with Argentina and Uruguay. Officials also announced Brazil and Venezuela agreed to share the cost of building a new US$2.5 billion (euro2.08 billion) refinery in northeastern Brazil to process up to 200,000 barrels of crude a day.

Officials have announced few specifics of future deals under the Petroamerica initiative, but some of its aims include stepping up refining capacity and promoting joint exploitation of oil and natural gas.

Officials have not excluded the possibility that Chavez may also extend new offers of oil sales under preferential terms as he has before.

"Everyone on the continent is looking with a lot of interest," Santiago Chavez, a trade official from Ecuador's embassy in Venezuela said after energy ministers from 12 South American countries signed a declaration in Caracas on Monday pledging to pursue the Petroamerica initiative.

Uruguay's energy subsecretary, Martin Ponce de Leon, has said one example of the type of integration under consideration was a plan for Venezuela to help expand a refinery in Uruguay to process 50,000 barrels of heavy crude a day.

Officials say Petroamerica will integrate previous cooperative oil projects -- Petrosur, Petrocaribe and Petroandina -- under which Venezuela has agreed to sell fuel to other countries in the region under preferential terms and with low-interest financing.

In June, Chavez signed the Petrocaribe deal with 13 Caribbean countries to sell 190,000 barrels of fuel a day under terms that are expected to save them millions of dollars.

Eleven of those countries have since signed more specific deals allowing them to pay only a portion of their debt up front and finance the rest over 25 years at low interest rates. Venezuela has also said they can pay some debts with goods such as rice, bananas or sugar.

Chavez, a close ally of Cuban leader Fidel Castro, has said the regional energy alliances are aimed at challenging U.S. economic domination in the region and distributing fuel directly to avoid costly intermediaries.

The Venezuelan leader has been a harsh critic of capitalism and accused U.S.-backed free trade policies of helping American companies at the expense of Latin countries by drawing away their natural resources, while doing nothing to confront poverty.

Some have accused Chavez of taking advantage of a tight oil market to buy political alliances.

"Who doesn't do that? ... Venezuela uses its petroleum at critical moments," said Professor Mazhar al Shereidah, a Venezuelan oil expert and professor at Central University of Venezuela. "Why would it lose this opportunity?"