Venezuela aims to build a new refinery in Cuba to process 150,000 barrels a day with the technology necessary to handle heavy crudes.

The new plant project, now in the pre-commissioning phase, would make it the third refining venture led by Petroleos de Venezuela SA, or PdVSA, in the island nation, according to PetroCaribe's first-half management report obtained by Dow Jones Newswires.

Venezuelan President Hugo Chavez, who keeps close political ties with Cuba's Fidel and Raul Castro, has made it clear his administration intends to keep up economic and energy cooperation with the Castro government. The strengthening ties between the two countries in energy matters suggest that Cuba will serve as Venezuela's key energy distribution hub in the region in years to come.

Construction of the new deep-conversion refinery would take place in the Cuban city of Matanzas and would cost an estimated $4.3 billion, the document shows. The plant would become operational in 2015. The refining initiative is part of Venezuela's PetroCaribe program, a plan that includes energy infrastructure investments in Central America and the Caribbean. PetroCaribe also offers member countries generous financing terms for their oil purchases. Buyers can finance up to 50% of their oil bill payable in 25 years with a 1% fixed interest rate.

As part of its infrastructure plans for Cuba, PdVSA has already invested $166 million to revamp a former Soviet refinery in Cienfuegos so it can process 65,000 barrels a day. A second phase is planned to upgrade that facility to process up to 150,000 barrels a day.

Similarly, PdVSA is also increasing the processing capacity of Cuba's Hermanos Diaz refinery in Santiago, to 50,000 barrels a day from 22,000 barrels a day, with a deep-conversion unit as well. Investment in the Hermanos Diaz plant would run $855 million, according to the PetroCaribe report, and it's expected to begin operations in 2013.

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