* PDVSA head Del Pino says aim is to increase market competitiveness
* Proposal made at regional summit, and to OPEC country ambassadors
* Venezuela has already imported Algerian light crude for blending
By Andrew Cawthorne
ORINOCO BELT, Venezuela, April 19 (Reuters) - Venezuela has launched talks this month on a novel plan to blend the country's heavy crude with light oil from other OPEC allies, seeking to create a new variety that can compete against swelling U.S. and Canadian supplies.
The proposal, which would expand on a pilot scheme involving Algerian oil last year, envisions supplying refineries built for medium-grade crudes rather than the light oil that has become plentiful as a result of the North American shale boom, said the head of state oil company PDVSA, Eulogio del Pino.
Del Pino said he raised the idea during the Summit of the Americas in Panama earlier this month and at a meeting with ambassadors from the Organization of the Petroleum Exporting Countries in Caracas last week. He did not specify how other members had responded or what the next steps would be.
The talks suggest that PDVSA's new leadership is eyeing creative ways to retain its U.S. market share at a time of intensifying competition, and to ride out a deep slump in global oil prices that has worsened a recession in Venezuela.
The plan, if agreed, could help Venezuela get more value from its heavy grades, which are under pressure from the rapid rise in shipments of Canadian crude to refineries on the U.S. Gulf Coast, while giving a similar advantage to OPEC members whose lighter oil has been pushed aside by U.S. shale.
"We are proposing to blend oils from here with theirs, to go to the market together," Del Pino told a handful of reporters while narrating a recent helicopter tour of the Orinoco Belt.
He cited Algeria and Angola as potential partners given their light blends. Their combined exports to the United States have fallen from some 1 million barrels per day (bpd) in 2010 to under 150,000 bpd in January, U.S. data show.
"It is a perfect complement of partners," Del Pino said.
The talks also offer a new perspective on Venezuela's engagement within OPEC. After failing to persuade the cartel to cut output last November, Caracas has toned down public efforts to cajole powerful Gulf producers into shoring up prices.
Blending together different varieties of oil from different countries to create a consistent new grade is unusual but not unprecedented. Many refiners prefer a "pure" crude that comes from the same field each time; it can be difficult to maintain consistent chemical properties with blended grades.
At the moment, however, there is growing interest in medium blends that are easier to refine than thick heavy crudes but cheaper than lights, as U.S. refiners near the limits of abundant light crude they can easily consume.
"We have five refineries in the Gulf of Mexico we own or share," Del Pino said. "Most of the refineries were built there for medium-heavy oil. They are not adapted for the new light oil from fracking in the United States."
Venezuela last year imported Algerian Sahara crude blend to dilute its ultra-heavy Orinoco Belt oil during the maintenance of a heavy-crude upgrader, using it as a substitute for more expensive naphtha that it has historically used.
Most went to its U.S. refining subsidiary Citgo, Del Pino said. Citgo buys nearly 30 percent of the Venezuelan oil that is exported to the United States, according to U.S. data. But overall U.S.-bound sales have fallen 38 percent since 2009.
"We are evaluating that (blending oil) to (perhaps) repeat it," he said, adding that Venezuela had produced 20 million barrels from the 4 million barrels it bought from Algeria in two cargoes of Sahara Blend.
"Maybe we are going to repeat it, but with a different type of oil. Maybe we can find a better blend. The ideal blend is the one that best serves the market."
The proposal's success may hinge on whether freight rates would make it profitable to ship African crude to Venezuela for blending and then on to the markets. If not, the OPEC nations might prefer to simply sell their oil elsewhere.
Other U.S. refineries may be less interested in such blends. Some are already expressing frustration at increasing the amount of shale oil blended with Canadian crude because it results in feedstock with unreliable or undesirable characteristics.
A PDVSA director, Ruben Figuera, told foreign journalists at a briefing that the Algerian crude imports had saved Venezuela between $10-20 a barrel.
"The strategy worked. Everyone was happy," he said. (Writing by Brian Ellsworth,; Editing by Alexandra Ulmer, Jonathan Leff and Jonathan Oatis)