CARACAS, Feb 2 (Reuters) - Venezuela's state-run oil company PDVSA is seeking a $1 billion up-front payment for several large shipments of fuel oil, El Universal newspaper reported on Saturday, in what may be a new sign of cash flow problems.

Under the deal, Venezuela is selling the fuel relatively cheaply but wants payment next week, the newspaper said.

PDVSA wants to find buyers for eight very large crude carrier cargoes of fuel oil by Feb. 6 and expects payment the following day.

President Hugo Chavez uses PDVSA as the financial engine of his socialist revolution, drawing down capital for social projects, and analysts say the company is facing a cash crunch despite high crude prices.

In December, PDVSA cut the payment time for oil exports to eight days from a month, citing a weakening dollar.

The company has increased the practice of borrowing money and settling debts by directly paying in oil and products.

In 2007, the company's debt soared to $16 billion on heavy borrowing to pay for operations and a spate of nationalizations.

Last week, ratings agency Moody's Investor Services said the debt load, which has increased from about $2.9 billion in 2006, was evidence that capital spending exceeds internal cash flow.

In November, PDVSA struck a deal to borrow $4 billion from China in return for fuel oil shipments.

Venezuela's refineries have suffered repeated accidents and outages over the past year that may leave them producing large quantities of fuel oil, because converting fuel oil to higher grade fuels requires complex refining processes.

PDVSA last year borrowed $3.5 billion from a group of banks and trading houses in energy-thirsty Japan that was repayable in fuel and products.

It also settled a debt with BP Plc and France's Total by paying them crude oil for seizing their assets during a dispute over an oil field instead of compensating with cash.

(Reporting by Frank Jack Daniel; Editing by Bill Trott)

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