* Issue size has been increased from $2 bln
* Conditions to be published in coming days
(Adds Ramirez comments, paragraphs 5-6)
By Daniel Wallis
CARACAS, Sept 23 (Reuters) - Venezuela's state oil company PDVSA will issue a $3 billion bond in the first two weeks of October, the firm said in a statement on Thursday.
President Hugo Chavez had said last month that PDVSA would soon issue a $2 billion bond, but market sources said recently that they expected the size to be increased to $3 billion.
PDVSA said the paper would be issued through the Central Bank's foreign exchange system, SITME, and that investors could buy it in the local bolivar currency and sell it for dollars.
"The issue is planned for the first two weeks of October," the company said in its statement.
Venezuelan Oil Minister and PDVSA boss Rafael Ramirez said the bond's terms and conditions, as well as its prospectus, would be published soon, probably on Sept. 27th or 28th.
"It's an issue that is open to the public and it is very important that it is being made through SITME ... which guarantees a fair exchange rate for users of the currency system," Ramirez told state television.
The Finance Ministry also issued a $3 billion sovereign bond last month, which offered a very high coupon and was heavily oversubscribed. [ID:nN16259736]
South America's biggest oil producer is one of the few countries to often issue debt for foreign exchange purposes.
The dollar has been in short supply for importers unable to access government-allocated hard currency under strict capital controls that were imposed in 2003 by Chavez.
His government has been battling a second year of recession ahead of legislative elections on Sunday. [ID:nVENEZUELA]
SITME, which began operating in June to replace an unregulated, "parallel" market, has been selling dollars at a rate of about 5.3 bolivars to a restricted group of buyers. Businesses are subject to limits of $50,000 per day and $350,000 per month.
Market players in Caracas said they expected the government had wanted to issue the new PDVSA bond ahead of this weekend's ballot to try to ease the pressure on local businesses.
"I think they just couldn't get it done because of campaigning, because everyone in the government had to go out and push and do whatever they have to do, speak, raise money," said Russ Dallen, head trader at BBO Financial Services.
He said SITME had also increased the amount of dollars it was selling to the market by between 20 percent and 25 percent during September to around $40 million a day.
"I think it's focused on the election ... They want to alleviate the shortages and put goods on the shelves, hoping that people will forget the hardships they've had," he said. (Editing by Kim Coghill)