With his back to the wall, would Iraq's Saddam Hussein blow up his oil wells? Just in case, the U.S. military is asking well blowout specialists to be prepared  www.canada.com Chris Varcoe Calgary Herald Saturday, January 11, 2003

The U.S. suspects Saddam Hussein would light his oilfields on fire as part of a "scorched earth" policy.   Safety Boss workers struggle to bring a wellhead under control in Kuwait in 1991.   Mike Miller of Safety Boss expects Saddam to torch the oilfields again if threatened by U.S. military action.   The Kuwaiti oilfield fires of 1991 blackened skies for months and burned up to seven million barrels a day.   As the world inches towards war in the Middle East, the Canadians who helped snuff out the fires of Kuwait are advising the U.S. military on how Iraqi President Saddam Hussein might torch his own oil wells.

Mike Miller, head of Safety Boss Inc., international well-blowout specialists based in Calgary, was contacted by U.S. army explosive experts this week seeking information on how Iraq blew up more than 700 wells in Kuwait during the Persian Gulf War.

Officials in Washington believe Hussein might set his own wells on fire as part of a scorched earth policy during a new war in Iraq, a country containing 10 per cent of the world's crude supplies.

With oil prices rising above $30 US a barrel in recent weeks, energy traders and political pundits are already anticipating a clash between Western armies and Hussein's Republican Guard.

"Obviously, they're not hiring us yet but they want to know how the damage was caused to the wellheads in Kuwait during the first go-around and what kind of damage could be caused now," Miller says.

"We had a discussion this morning with what kind of explosives (Iraq) may have. They think the Iraqis may have seismic explosives and that is similar (to 1991) and can cause the same damage. So things are heating up."

Miller, whose Canadian team capped 163 wild wells in 202 days in Kuwait, shipped U.S. experts pictures showing a well rigged with plastic explosives that failed to explode during the first Gulf War.

The issue of Saddam attacking his own oil industry has become a concern in Washington with a U.S.-led invasion widely expected in the coming months.

About 120,000 American troops are expected to be in the region within a month and plans are being made to avoid a repeat disaster involving oilfields being set ablaze.

"We would want to protect those fields and make sure they are used to benefit the people of Iraq and are not destroyed or damaged by a failing regime on the way out the door," U.S. Secretary of State Colin Powell said last month.

In Kuwait, the head of the country's state-owned oil monopoly expects such a tactic as Iraq's ruler fights for his survival.

"He is the man that you expect the unexpected (from) and as long as he did it for Kuwait, he would do it for other parts, even if it is for his own oilfields," Ahmed Al Arbeed, chairman of Kuwait Oil Co., told CNN recently.

The environmental and economic consequence of such actions would be immense, given the experience in Kuwait.

The infamous Fires of Kuwait, as they have been known since 1991, blackened the skies over the tiny Gulf state for months, causing black rain to fall from the skies and torching up to seven million barrels a day.

The attack caused some wells to spew more than 60,000 barrels of crude per day, creating dozens of oil lakes in the desert.

A report by the Washington-based Centre for Strategic and International Studies (CSIS) noted recently that a second Gulf War would likely be swift and lead to Saddam's defeat, but Iraq's urban warfare strategy "could include deliberate efforts to burn oilfields and create water barriers."

Iraq produces up to 2.8 million barrels per day, although its petroleum industry has been hampered for a dozen years by international sanctions imposed after its invasion of Kuwait.

Well fires could however cause major problems, restricting the ability of soldiers to move through the country and stoking energy prices around the world.

"Iraq's southern oilfields are between the U.S. military and Baghdad and the presumption is that with an army coming, the fields are in harm's way," says Michael Lynch, an energy expert at the Massachusetts Institute of Technology's Centre for International Studies.

"It's very difficult to fly helicopters in thick black smoke. He may put smoke in the air and put up as much chaos as he can. . . He has asked the Iraqi people to make sacrifices before and it's very easy to imagine him doing that.

"The question is how do we stop it?"

Another major concern is whether Hussein attempts to attack oil installations in neighbouring Kuwait and Saudi Arabia, jeopardizing production from the large OPEC members.

Lynch believes the likelihood of such an event succeeding -- one of the market's great fears -- is extremely low, given Iraq's failure to damage Saudi oilfields with Scud missiles in 1991.

Geographically, two of Iraq's largest oilfields -- Kirkuk in the country's north, and Rumaila near the southern border with Kuwait -- are close to U.S. forces and could be seized quickly by coalition soldiers, preventing serious damage.

Yet, even the prospect of losing some of Iraq's production for several months would have an impact on tight energy markets, which are currently grappling with a strike by Venezuela's oil workers that has choked off its exports.

"In our worse-case scenario, we feel Saddam has nothing to lose and puts the torch to his oil wells," says Robert Ebel, director of energy for CSIS. "The worst case scenario is he torches his field. . . and (oil) prices spike."

The CSIS report says if the war is relatively benign, oil prices would average about $36 US a barrel during the first three months of the year, before backing off sharply.

However, deliberate acts of sabotage of Iraq's oil infrastructure would drive prices higher. If the war drags on and retreating soldiers set most wells in Iraq on fire -- and production in other Middle East countries is impeded -- prices could hit $80 a barrel through the first quarter, the report warns.

"I would hope the coalition would take acton early on to capture those fields," Ebel says. "No one knows what goes on inside Saddam's brain."

University of Tulsa professor Dobie Lagenkamp, former deputy assistant secretary for oil in the U.S. Department of Energy, says a larger threat is that crude production is choked off if there's a scramble to control the oilfields by various factions within Iraq.

"I don't see any substantial interruption, because there's no motivation for anyone to shut them down," Lagenkamp says of the country's oil wells.

"The problem isn't the oilfields being destroyed, but who has control over the fields?"

There's little doubt world energy markets are in a fragile state today given the geopolitical complexities of Iraq, the war on terrorism and the near shutdown of Venezuela's oil industry.

Lynch compares the instability to the last Gulf War period, which saw crude shoot up above $40 a barrel only to tumble more than $10 on the day hostilities began, Jan. 17, 1991.

The U.S. Energy Information Administration warned this week that markets are extremely volatile and American oil inventories are near their lowest point in 26 years.

There is some reason for optimism, though. OPEC members, including Saudi Arabia, are contemplating a large production increase in the coming days to tame rising prices.

Saudi officials insist they have excess capacity -- analysts peg it near 2.5 million barrels per day -- and the kingdom could ramp up production quickly.

If oil prices spike, consuming countries also have a short-term mechanism to coax down prices, notes a study by George Perry of the Brookings Institution in Washington.

The United States has access to 570 million barrels of oil in its strategic petroleum reserve -- enough to supply about 2.8 million barrels per day for six months.

Other countries are stockpiling another 700 million barrels.

"We're not worried about the loss of Iraqi oil per se, because it can be made up," notes Ebel.

"But what if Venezuela is still off? Now you've got a real oil supply shortage looking you in the face."

Back in Calgary, talk of a new Gulf War hasn't gone unnoticed.

Well blowout specialists, a small fraternity with only a handful of expert capable of capping large fires, are preparing for a possible return to the region.

The situation, however, is different this time.

During the first Gulf War, Kuwaiti's rulers had access to money in western banks and spent four months before the battle began planning the blowout-stopping operation.

The tiny country's oil production fell to almost nothing, but was largely brought back on stream within 18 months.

In Iraq, the situation is less clear. It's unknown who would run the country following a war, or where the money would come from to cap any wild wells.

Still, the waiting goes on.

"In the past year when it became evident the U.S. would act, it came to our minds immediately that (Hussein) would most likely -- if seriously threatened -- set the oilwells off," says Miller of Safety Boss.

"He's done it before. There's no reason to think he wouldn't do it again."

varcoec@theherald.southam.ca

www.northjersey.com Saturday, January 11, 2003 By PETE CALDERA Staff Writer

PORT ST. LUCIE, Fla. - Tyler Walker still appreciates the fierce passion of Venezuelans, who take their baseball seriously. That passion extends to politics, and Walker was far too close to the action.

From his hotel room, Walker watched protesters being halted by tear gas and rubber bullets.

When the political climate between forces loyal to, and against, President Hugo Chavez led to extreme violence, the Mets' minor league pitcher was forced to leave the country.

Walker, 26, departed Venezuela on Dec. 10 without having thrown a pitch. Political unrest that sprouted a massive labor strike led to cancellation of the winter league season, and Walker barely left his hotel in nearly two weeks.

"I felt safe in the hotel, but it was definitely a scary situation," he said. "Basically, we were like hostages in our hotel rooms."

Walker's window at the Best Western was in view of the National Guard headquarters across the street. When protesters came too close, Walker could see the bullets and tear gas canisters fly.

"If you opened your window, you could smell it," he said.

Stir crazy, Walker ventured out with fellow players to a restaurant. That night, he saw a group of screaming people scatter. Later, he learned that farther down the street a protester had been shot to death at point-blank range.

"That's when I knew we had to get out of there," said Walker, who went home to Northern California.

The Mets had five other prospects in Venezuela who played until the season's abrupt end in late November, including pitcher Jae Seo (3-2, .398 ERA), who made seven starts.

Roger Cedeno's mother and brother remain in Venezuela. "I would rather have them here [in the United States]," Cedeno said. "But it's tough for them to leave their lives and their home."

Two months ago, Cedeno became a U.S. resident, and proudly flashed his card to John Franco at a nearby locker. Cedeno would like to become a U.S. citizen, a process he said would take another four-to-six years.

METS BRIEFS: Tsuyoshi Shinjo has agreed to the structure of a one-year deal, with a base salary of $600,000. But the outfielder has requested a full no-trade clause, and his U.S.-based representatives were waiting to hear the Mets' response as of Friday night. Shinjo is expected to battle for the everyday center fielder's job, or could platoon with Cedeno ... . Mets' four-day minicamp concludes today. Pitchers and catchers officially report Feb. 13.

sg.biz.yahoo.com Saturday January 11, 8:01 PM By Fred Pals Of DOW JONES NEWSWIRES

VIENNA (Dow Jones)--At OPEC's extraordinary meeting this Sunday in Vienna, troubled Venezuela can only sit tight and nod in agreement with OPEC's decision to boost oil production in an effort to ease world oil prices.

But by sending both Oil Minister Rafael Ramirez and the president of state-owned oil monopoly Petroleos de Venezuela (E.PVZ), or PdVSA, Ali Rodriguez - a former OPEC Secretary General - to the meeting, President Hugo Chavez wants to make sure the country gets its share eventually, oil ministry sources say.

The two top officials want OPEC to get the message that Venezuela will return to its production levels of around 3 million barrels a day pumped before a general strike began 42 days ago. "We don't see the need for much new oil. But we want to make sure that part of the barrels now being put on to the market by other members to make up for our shortfall eventually will get back to us," an oil ministry source, who declined to be named, said Saturday.

In telephone talks with Iran's President Mohammed Khatami, Chavez Friday voiced concern about measures taken by some OPEC members to raise their output ceiling. There are signals OPEC will agree on the usual increase shared equally across its members, excluding Iraq. A temporary allocation of the extra barrels may also be agreed. The reality, however, is likely to see OPEC's kingpin Saudi Arabia make up for most of Venezuela's shortfall. "It may be difficult, but we need to convince OPEC we're able to get back to our usual production levels," said another Venezuelan government source, who also declined to be named.

Indeed, Venezuela's plea may fall on deaf ears as most industry observers question the country's ability to bring state-owned oil giant PdVSA back to its feet anytime soon.

Analysts agree it will take the company months to bring output capacity back to slightly more than 3 million b/d.

The nationwide strike that started Dec. 2 has crippled the vital oil industry and slashed production and exports to less than 20% of their usual level.

Production is seen at only around 400,000 b/d or less. Exports remain marginal. Refinery activities also are paralyzed, with some refining taking place at the 100,000 b/d Puerto la Cruz refinery in eastern Venezuela.

OPEC is gathering Sunday to discuss the volatile world oil markets that has driven the oil price up to around $30/bbl. Apart from the Venezuelan shortfall, OPEC also has to deal with the prospect of a war between the U.S. and Iraq and a seasonal downturn in consumption starting in the second quarter.

The International Energy Agency, the energy watchdog of the world's richest nations, said Friday that OPEC needs to increase oil output by more than 2 million b/d to offset the loss of Venezuelan oil. OPEC members have said a boost of 1 million-1.5 million b/d is being discussed. A 2 million b/d boost is seen as too much.

Chavez Continues PdVSA Purge; Referendum May Be Postponed

Meanwhile, Chavez's efforts to continue his purge at PdVSA won't help to convince OPEC the company will soon recover. Chavez announced Friday that he had sacked 1,000 employees since the strike started. "The revolutionary government is standing firm," Chavez said. "An oligarchy ... has reared like a poisonous serpent to destroy the path of justice that we are paving. The people and our morals won't let them." At least 30,000 of the company's 40,000 workers are participating in the strike.

Chavez said the government would have to invest "thousands of millions of dollars" if the oil industry is to recuperate. He urged Venezuela's attorney general to imprison strikers, whom he called "criminals" and "traitors to the country." Analysts, however, question the government's ability to keep PdVSA running with untrained personnel and replacement crews.

Early last week, Oil Minister Rafael Ramirez announced PdVSA will eventually have two centers of operation, in the east and west of the country, adding that much of its headquarters in Caracas will be dismantled. He didn't say how many of the 7,000 employed at the Caracas HQ will lose their jobs. A majority, however, are on strike and the government has vowed to dismiss those who are on strike.

The strikers, backed by a range of business, labor and political leaders, want Chavez to resign and early elections to follow.

Chavez, however, has refused to give in. A referendum on his rule scheduled for Feb. 2 may be postponed. Chavez says Venezuela's constitution only permits such a referendum halfway into his six-year term, or in August.

-By Fred Pals, Dow Jones Newswires;0043-664-5446851; fred.pals.dowjones.com

Oil shortages from strike could raise the cost of a war www.sfgate.com James Dao, Neela Banerjee, New York Times Saturday, January 11, 2003

Washington -- The crisis in Venezuela is creating major new complications for the Bush administration's campaign to oust Saddam Hussein, causing oil shortages that would probably make a Persian Gulf war more costly to the economy than once anticipated, American officials and industry experts said.

The 40-day strike aimed at ousting President Hugo Chavez has virtually shut down Venezuela's oil industry, the fifth-largest in the world, and proven more difficult to resolve than the administration expected, the officials said.

Venezuela has for decades been one of the most dependable sources of petroleum for the United States, where industry analysts say the strike has already hurt some refineries and driven up the retail price of gasoline by at least a dime a gallon.

Those shortages will only worsen, and prices continue to rise, if the United States attacks Iraq, they predicted. That means that war in the Persian Gulf could prove more costly to an already uncertain U.S. economy than had been projected if the Venezuelan standoff is not ended soon.

For that reason the Bush administration has been debating plans to release oil from the Strategic Petroleum Reserve, which contains nearly 600 million gallons of crude. For now, though, the White House has decided to defer those plans, mainly to keep oil available in case of war in Iraq, administration officials said.

"A few months ago everybody thought that if we went to war in Iraq, oil wouldn't be a major problem, because there was enough spare capacity to make up for lost Iraqi oil," said Larry Goldstein, president of the Petroleum Industry Research Foundation Inc., a research organization. "But no one then was contemplating lost Venezuelan oil."

"Now," he said, "we won't have enough spare capacity to take care of both those events."

The crisis could be compounded if Chavez follows through on a proposal to split the government-owned oil company, Petroleos de Venezuela S.A., into two parts and restructure its central offices.

American officials say Chavez's true goal is to install political loyalists in place of the union leaders and senior managers at the oil company, known as PDVSA, who have joined the strike.

The result could be a more pliable but less efficient company that produces less oil than the roughly 3 million barrels a day that Venezuela produced before the strike, officials and experts said. That could leave the United States even more dependent on Middle Eastern oil.

"Petroleos is one of the few state-owned oil companies in the OPEC group that approximates a normal integrated major oil company," said Leonidas Drollas, chief economist with the Center for Global Energy Studies in London. Echoing other industry analysts, Drollas added, "To break it up into anything sounds obviously politically motivated."

On Friday, Chavez threatened to send soldiers to seize control of food- production facilities and also fired 700 workers from the oil monopoly, hoping to break the strike.

Chavez, a former paratroop commander, told soldiers to be ready "to militarily seize the food production plants" that joined the strike. He asked state governors belonging to his political coalition to be ready to cooperate.

Rafael Alfonzo, president of Venezuela's food producers chamber, blamed the shortages on Chavez for refusing to cede to opposition demands. He insisted food makers were producing staples but said fuel shortages had hampered deliveries.

The Bush administration, acknowledging the growing danger from the Venezuelan strike, has stepped up its efforts to calm the oil markets, lobbying major oil exporters to increase production. At a meeting in Vienna this weekend, the Organization of the Petroleum Exporting Countries is expected to vote to increase production by 8.7 percent, or nearly 2 million barrels a day, officials said.

The United States is also working with Mexico, Brazil and the Organization of American States to cobble together a coalition of South American governments to broker a truce. Diplomats working on the crisis are worried that the OAS, which has spearheaded negotiations, lacks the influence to persuade Chavez to consider concessions.

www.irna.com

Tehran, Jan 11, IRNA -- The following economic news headlines appearedin major Tehran dailies on Saturday:

-- ABRAR-E EQTESADI                                               
"CBI to start issuing participation bonds on Sunday"              
The Central Bank of Iran (CBI) on Sunday will start issuing       

participation bonds with an annual interest rate of 17 percent in five denominations ranging between one to 20 million rials.

-- AFARINESH                                                      
"CBI to finance 10,000 billion rials of govt's job-creating plans"
Governor of the Central Bank of Iran (CBI) Mohsen Nourbakhsh      

said that the CBI had agreed to provide as much as 10,000 billion
rials financial support for the government's job-creating projects
through bank credits.

-- AFTAB-E YAZD                                                   
"Venezuela to use Iran's help to improve oil industry"            
Venezuelan deputy minister of the interior has called on the      

Iranian Oil Ministry to support the country's requirements in that
sector, expressing hope that the Islamic Republic relying on its
efficient expert knowledge in the area can help improve the oil
industries of the country.

-- ASIA DAILY FINANCIAL NEWS                                      
"Rich prospects for Tehran-Tokyo economic ties"                   
Takekazu Kawamura, the Japanese Ambassador to Tehran on Wednesday  said the Iran-Japan current trade volume was insufficient regarding their rich opportunities and prospects to promote relations, stressing that Tokyo is throwing extraordinary weight on the mobilization of a strong monetary market to support investment by Japanese companies in Iran.                                                                 

-- ENTEKHAB                                                       
"State Organization of Carpet to be established by March"         
Director-General of Iran Farsh (Carpet) Company Mohammad-Ali      

Karimi has said that the Organization of Carpet will be established by the end of the current Iranian calendar year (March 20, 2003),
stressing that the organization will facilitate policy-making in the
industry.

-- IRAN                                                           
"UK BAT, Iran Tobacco Co. sign deal to produce cigarettes"        
Iran's Tobacco Company and the British American Tobacco (BAT) have

recently concluded a deal worth US dollars 30 million for the
production of "Montana" cigarettes in the Islamic Republic.
Iran Tobacco Company under the deal has agreed to prepare one of
its subsidiary plants for the production of Montana cigarettes, while BAT is committed to provide expert work force, as well as the
necessary equipment and facilities to the effect.

-- IRAN DAILY                                                     
"Majlis rectifies aggregate tax bill"                             
Majlis has removed the ambiguities in the bill on aggregate taxes 

which was sent back from the Guardians Council limiting the
authority of rural and city council to collect taxes and duties from
locals and specifying the tax rates on various professions.

-- IRAN NEWS                                                      
"Accidents, disasters damage at $10b"                             
Deputy Minister of Health Mohammad Mohammad Ismail Akbari said the

cost associated with natural disasters, and traffic accidents is
around US dollars 10 billion annually, stressing that there is a need for change of behavior in society to remove those incidents that
threaten the health of the public.

-- KAYHAN INTERNATIONAL                                           
"Export of textile, clothing up by 45 percent"                    
Government spokesman Abdollah Ramezanzadeh said here Wednesday,   

based on the report released by the Ministry of Industries and Mines, a 45 percent rise is observed in the export of textile and clothing
in the first eight months of the current Iranian year (started March
21).

-- SIASAT-E ROOZ                                                  
"Iran hopeful to attract large foreign credit in 2003"            
Iran's Minister of Finance Tahmasb Mazaheri has said that Iran    

hopes to attract four to five billion US dollars of direct foreign
credit over the next year in line with new laws that are meant to
improve the investment climate in the Islamic Republic.

-- TEHRAN TIMES                                                   
"Regional crises push up gold price in domestic market"           
Head of Tehran Gold, Jewels and Coins Guilds Association Kourosh  

Goharbin said here on Wednesday that regional crises and other
external factors have pushed up gold price across the nation, adding
that despite the absence of fluctuations in gold price in the past
week, a probable rise is quite likely in the event of a US attack on
Iraq.
AA/AR
End