UPDATE 3-ConocoPhillips settles with Venezuela's PDVSA to recover $2 bln

(Adds PDVSA confirmation, context)

Aug 20 (Reuters) - U.S. producer ConocoPhillips on Monday said Venezuela's PDVSA agreed to pay $2 billion to settle an arbitration award, suspending a dispute that blocked the state-run oil firm from exporting crude from most of its key Caribbean facilities.

Venezuela's crude production, a major source of revenue, has fallen to a six-decade low this year as lack of cash for investment, recession and hyperinflation pushed the OPEC-member country's economy to near collapse. The agreement could restore at least some of its exports by resuming shipping from Caribbean terminals.

Conoco will suspend legal enforcement of the arbitration award as long as the payments continue, spokesman Daren Beaudo said. He declined to say if the payments would be made in cash or crude oil, adding details of the agreement are confidential.

PDVSA confirmed a settlement was reached, but did not immediately elaborate on the payment terms.

The agreement came ahead of court hearings scheduled for next month in Bonaire and Aruba that could have enabled Conoco to begin selling PDVSA assets on the islands where it had obtained court attachments.

Conoco in 2007 brought an international arbitration claim against Venezuela over the nationalization of two oil projects in the OPEC-member country and later asked the International Chamber of Commerce (ICC) to solve a dispute on the early termination of contracts with PDVSA.

The ICC ruled in favor of Conoco in April, but no payment was made by PDVSA in the following weeks, heating up the dispute. In May, Conoco moved to seize most of PDVSA's Caribbean assets, knocking down the state-run company's exports, especially to Asian destinations.

PDVSA agreed to make an initial payment of around $500 million within 90 days of signing the agreement. The remainder is to be paid quarterly over a period of 4-1/2 years, Conoco said in a statement.

Under a new military-led management appointed late last year, PDVSA increasingly has struggled to produce, refine and export crude oil amid a severe lack of cash, also fueled by sanctions imposed last year by the U.S. government.

Previous payment agreements by the Venezuelan government and its state-run companies over dozens of arbitrations and legal claims related to late President Hugo Chavez's nationalizations a decade ago, have mostly failed to fulfill the terms, ending in renegotiations and legal disputes.

"Venezuela's (President Nicolas) Maduro has short-term, patchwork approach to fixing problems. This means that whomever pressures or checkmates the government early enough, will get some cash as country spirals downward," tweeted Raul Gallegos, associate director with consultancy Control Risks.

Venezuela's economy, almost completely dependent on oil exports, is in deep recession with hyperinflation and severe shortages of basic goods like medicine and food.

Conoco said it will make sure that the settlement meets all appropriate U.S. regulatory requirements, including any applicable sanctions against Venezuela.

Conoco left Venezuela after it could not reach a deal to convert its projects into joint ventures controlled by PDVSA. Its assets were expropriated in 2007.

Conoco's shares were up 1.4 percent at $70.74 in morning trading. (Reporting by Nivedita Bhattacharjee in Bengaluru, Gary McWilliams in Houston and Marianna Parraga in Mexico City; Editing by Anil D'Silva, Saumyadeb Chakrabarty and Susan Thomas)