10 Jan 2003 18:51 www.alertnet.org

NEW YORK, Jan 10 (Reuters) - Oil production in Venezuela would need four months to recover to near normal levels if the the 40-day-old strike were to end today, dissident state oil company executives said on Friday.

"In a couple of months maybe we can restore production by 50 percent, mainly of the light crude oil production, and in a period of four months, we might be in the level of 90 percent," Marco Rossi, a striking executive with Petroleos de Venezuela (PDVSA), Venezuela's state oil company told a teleconference call on Friday.

Venezuela was producing about 3.1 million barrels of crude per day before the strike.

The rebel PDVSA officials were making their case for the strike to the U.S. energy industry for the first time.

Venezuelan crude oil installations, including PDVSA's 940,000 bpd Amuay-Cardon plant, the western hemisphere's largest refinery complex, have been virtually stopped by the strike.

The strikers said that, because they did not have access to operations, it was difficult to confirm claims of ecological damage caused by the replacement of regular oil workers with people appointed by the government.

Opposition officials have said oil has been spilled during tanker loading operations in the western Lake Maracaibo production center and that such incidents have increased by "1,000 percent" since the beginning of the strike.

The labor turmoil has cut production by the world's No. 5 oil exporter, a leading supplier to the United States, and caused shortages of gasoline domestically.

The Chavez government says the strike has cut oil production to 600,000 bpd, while the opposition said on Friday production had fallen to 340,000 bpd.

The strikers said Venezuela has had to turn to alternative sources of petroleum products, including buying gasoline from Brazil and diesel from Malaysia.

PDVSA was seeking gasoline from the U.S. Gulf for late January, U.S. traders said on Thursday.

Strikers have vowed to continue the strike until leftist President Hugo Chavez leaves office.

Striking PDVSA workers have said government efforts to restart operations using replacement workers would fail, and that adequate production could only be resumed when striking employees returned.

www.forbes.com Reuters, 01.10.03, 2:21 PM ET

(Full text of press release provided by Fitch Ratings. ) NEW YORK, Jan 10 - Fitch Ratings has downgraded the senior unsecured debt rating of CITGO Petroleum Corporation to 'BB-' from 'BBB-'. Fitch has also lowered the rating on the senior notes of PDV America, Inc. to 'B-' from 'BB+'. CITGO is owned by PDV America, an indirect, wholly owned subsidiary of Petroleos de Venezuela S.A. (PDVSA), the state-owned oil company of Venezuela. CITGO and PDV America remain on Rating Watch Negative.

The downgrades reflect Fitch's heightened concerns with the financial flexibility of both CITGO and PDV America due to the general strike in Venezuela, which has severely disrupted the country's oil exports. Earlier today, Fitch downgraded the long-term foreign currency rating of Venezuela and PDVSA to 'CCC+' from 'B' and the short-term foreign currency (Venezuelan bolivar) rating of Venezuela to 'C' from 'B'.

As a result of the strike, CITGO has been forced to find alternate sources for much of the crude supplied by PDVSA. CITGO typically purchases approximately 50% of its crude needs from PDVSA under long-term contracts. CITGO has been successful acquiring alternate crudes and other feedstocks to maintain refinery operations. However, spot market terms have increased working capital requirements and given the lowered credit ratings of CITGO related entities, additional working capital requirements are possible.

Near term obligations as well as a rating trigger in the company's trade accounts receivable program could significantly reduce CITGO's liquidity. Unless CITGO achieves a waiver, Fitch's downgrade will result in termination of the accounts receivable program. In mid-December, CITGO entered into a new $520 million credit facility, split into a $260 million three-year facility and a $260 million 364-day revolver. Concerns over the situation in Venezuela, however, have limited CITGO's ability to enter the capital markets for a planned bond issuance in the fourth quarter of 2002.

The CITGO downgrade and the more severe downgrade to the senior notes of PDV America are also based on the deteriorating creditworthiness of PDVSA and Venezuela. The $500 million of senior notes mature in August 2003 and are supported by Mirror Notes issued by PDVSA and held by PDV America. The senior notes and Mirror Notes have identical terms and conditions such that the interest income PDV America receives from PDVSA on the mirror notes pays the interest on the senior notes. In an absence of a return to normal oil operations, Fitch has significant concerns with the ultimate parent's ability and willingness to pay the maturity of the notes. In 1998 and 2000, dividends from CITGO were ultimately used to pay the $250 million tranches that matured in each of those years. Given CITGO's current financial situation, CITGO is not expected to pay any dividends to PDVSA to support PDV America's senior notes.

The situation in Venezuela remains highly volatile. Although Fitch expects CITGO to maintain operations, further deterioration in CITGO's financial position or the ultimate shareholders credit quality could result in additional downgrades.

CITGO is one of the largest independent crude oil refiners in the United States with three modern, highly complex crude oil refineries and two asphalt refineries with a combined capacity of 756,000 barrels per day. The company also owns approximately 41% interest in LYONDELL-CITGO Refining L.P. (LCR), a limited liability company that owns and operates a 265,000-barrel per day (BPD) crude oil refinery in Houston, Texas. CITGO markets refined products through approximately 13,400 independently owned and operated retail sites.

www.alertnet.org Jan 2003 18:53

CARACAS, Venezuela, Jan 10 (Reuters) - Efforts by the Venezuelan government to break a crippling 40-day oil strike by selling crude through through the Internet may not boost shipments from the world's No. 5 exporter, U.S. refiners said on Friday.

The Venezuelan government, which relies on oil exports for half of revenues, is trying to sell oil through Miami-based Web site Pepex.net to overcome a personnel shortage caused by the shutdown by foes of President Hugo Chavez.

The strike has strong support among managers, executives and traders from state oil firm Petroleos de Venezuela (PDVSA) as well as field workers, tanker captains and dock crews.

But U.S. refiners, which normally purchase over half of Venezuela's crude exports, said that dangerous port conditions created by government replacement workers could still hinder them from loading tankers.

"They can't load, the same security problems are there," an official with a U.S. refiner said. Loadings by unqualified and uncertified staff creates insurance risks for firms.

International markets have been denied 80 percent of the 2.7 million barrels per day (bpd) of crude and products the OPEC nation shipped before the strike started on Dec. 2.

The United States usually buys 13 percent of its imported crude from Venezuela, and refiners dependent on certain grades from the South American nation have cut runs.

Striking PDVSA executives said on Friday they do not usually use a tender system such as the one being used on the Pepex Web site to sell crude.

Regular customers said it may be best to wait until PDVSA has officially brought operations back to normal and ports were secured before attempting to lift cargoes again.

"We won't load as long as the force majeure is in place," said one U.S. refiner that buys Venezuelan crude.

PDVSA declared force majeure, meaning it could not meet its contractual obligations, in early December. Some vessels chartered by PDVSA or its U.S. refining affiliate Citgo have loaded with cargoes to the United States and the Caribbean.

Oil production problems have also kept exports choked. The government has only been able to reestablish output to about 450,000 bpd according to one PDVSA official, compared with 3.1 million bpd in November.

Attempts to restart the 130,000 bpd domestic El Palito refiner damaged the vacuum unit, striking PDVSA workers said, and they claim oil has been spilled by tankers loading at the western Lake Maracaibo production areas.

cnews.canoe.ca

WASHINGTON (AP) -- The Bush administration is engaged with other nations in the hemisphere in talks to explore ways to end the five-week strike in Venezuela that has crippled oil exports, White House spokesman Ari Fleischer said Friday.

"We remain deeply concerned about the deteriorating situation in Venezuela," Fleisher said.

He said the administration was working with the Organization of American States and member nations to explore ways to peacefully end the standoff between the government of President Hugo Chavez and his opponents.

OAS Secretary General Cesar Gaviria has been quietly discussing options with other OAS states, including formation of a "Friends of Venezuela" group "to help the Venezuelans find a solution," Fleischer said.

The Washington Post reported in Friday editions that the United States was putting aside its reluctance to get involved in Venezuela's internal affairs and readying an initiative to form a group of nations to try to end the deadlock.

The initiative may be rolled out next week, the newspaper said. It said the proposal's immediate goal would be to end the opposition-organized strike.

The group would seek to develop a compromise calling for early Venezuelan elections and building on OAS mediation efforts already under way, the newspaper said.

"It's in the early stages," Fleischer said when asked about the news account and the U.S. role in seeking a breakthrough. "An electoral solution is the direction the United States sees."

The strike has paralyzed the Venezuelan economy and brought its vital oil industry -- a top U.S. supplier and once the world's fifth-largest exporter -- to a virtual halt.

Breaking News smartmoney.com By Jehan Senaratna Of DOW JONES NEWSWIRES

CARACAS (Dow Jones)--Not conceding the slightest point, Venezuelan government and opposition groups dragged a general strike against President Hugo Chavez's leadership into its 40th day, as prospects for more deadly clashes grew.

As the government on Friday advanced efforts to revive the country's vital oil industry, most banks and supermarkets joined the strike and truckers said they would Monday. Opposition leaders also called for the nonpayment of utility bills as part of their protest.

Dismissing industry insiders' skepticism, Venezuela's perennially optimistic Planning Minister Felipe Perez outlined a schedule of oil output levels the government will achieve despite the strike, which has severely affected operations at state oil company Petroleos de Venezuela SA (E.PVZ), or PdVSA.

Perez, who once advised a press conference that "if you think positive, good things will happen," said during a televised interview that production will be at 2.4 million barrels per day in March, 2.7 million b/d in April, and "definitely," 2.9 million b/d in May.

Current output is 1.1 million b/d, he said, contradicting PdVSA president Ali Rodriguez's recent claim it was about 600,000 b/d, which in turn contradicted observers' reports it's at about 400,000 b/d. Before the strike, daily production stood at around 3 million barrels.

Meanwhile, the stock market remained shut, as did thousands of businesses, but traffic was heavy in some areas of this capital city as more Venezuelans returned to work.

But the government seems to have begun showing its frustration despite its efforts to dismiss the strike's effectiveness.

Thursday, opposition leaders canceled a planned peaceful march for fear of being attacked by Chavez supporters, who have recently initiated violent clashes at several demonstrations.

Police and National Guard troops now routinely use tear gas to disperse crowds, after two were killed last week in one such protest.

Foreigners are also affected.

A grenade was thrown at the Algerian ambassador's house Thursday, following bomb threats - which turned out to be hoaxes - at the embassies of Canada, Germany, Australia, and Uruguay.

Algeria was earlier reported to have sent technicians to help the government restart operations at PdVSA, raising the ire of opposition leaders.

As the tension in Venezuela persisted, some were comforted by reports the U.S. may be considering firmer measures to induce a solution to the crisis.

With concerns about an oil shortage mounting as a war with Iraq looms, the Bush administration is preparing a major initiative, to be launched in the next week, that would help end a deadlock in the talks between the government and the opposition and put an end to the strike, The Washington Post reported in its Friday editions, citing U.S. and foreign diplomatic sources.

U.S. government officials weren't immediately available to comment on the report.

But analysts were encouraged, and said Chavez may soon be forced into early elections, something the embattled president has rejected saying the constitution only requires him to abide by a possible recall vote in August, halfway through his term, which runs until early 2007.

"Of course, for the opposition (which is clamoring for early elections) it's very good news, and bad news for the government," said Alfredo Keller, head of a respected Caracas-based polling and economic research firm.

The U.S. effort will reportedly be channeled through the Organization of American States, which has been brokering unsuccessful negotiations between opposition and government representatives since November.

-By Jehan Senaratna, Dow Jones Newswires; 58212 564 1339; jehan.senaratna@dowjones.com