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VIENNA (AFX-ASIA) - Petroleos de Venezuela (PDVSA) president Ali Rodriguez said Venezuela was aiming to increase production to two mln barrels per day (bpd) as it fixed and regained control of refineries and other oil facilities.

Rodriguez, speaking on the sidelines of the weekend OPEC meeting that agreed to increase production quotas in response to Venezuela's crisis, described the six-week strike as "not a labour strike, this is a political conflict."

"The intention of these people is not to obtain benefits for workers but to defeat the government," said the head of the coutnry's state-owned oil company.

In Venezuela yesterday, thousands of opponents of the government marched to a heavily guarded military complex as they pressed demands that President Hugo Chavez resign.

The 11-nation Organization of Petroleum Exporting Countries, of which

Venezuela is a member, agreed yesterday to increase oil production by 1.5 million barrels per day (bpd) in a bid to curb a surge in prices triggered by the strike.

OPEC agreed to raise its combined output ceiling by 6.5 percent to 24.5 million bpd from next month to try to cool world oil markets.

OPEC President and Qatar Oil Minister Abdullah bin Hamad al-Attiyah said the Venezuelan crisis had taken over two million bpd of oil off world markets, adding that OPEC would roll back the output hike once Venezuelan exports recovered.

Rodriguez described the situation in Venezuela as a "force majeure."

"In the meantime we are now very positive as far as reaching a level in order to satisfy our commitments to our customers," he said.

Rodriguez said Venezuela had not ruled out turning to foreign oil technicians, saying that "in certain cases, the need for specialist help, notably in refining, is felt." afxasiadesk@afxnews.com msa/rl/tjc

www.iht.com NYT NYT Monday, January 13, 2003   Presidents Vicente Fox and George W. Bush both took office two years ago promising to forge a new partnership bridging the Rio Grande, a partnership marked by a once unimaginable level of cooperation on a number of fronts. It hasn't happened, and as a result Mexico's enlightened foreign minister, Jorge Castañeda, has resigned.

The centerpiece of the new relationship was to have been a new accord on immigration. That encountered early resistance on Capitol Hill, and the terrorist attacks of Sept. 11, 2001, rearranged the White House's priorities. Washington has since failed to recognize that an immigration deal that serves American economic needs and diminishes the population living illegally in the United States can be compatible with heightened security.

The White House's neglect has proved to be politically damaging to Fox's administration. The Mexican government had to overcome widespread public skepticism, and concerns about surrendering national sovereignty, to sell the idea of a new understanding with the neighboring superpower. Castañeda was the most outspoken advocate of closer ties with the United States. His frustration over the stalemate in the relationship contributed to his decision to resign.

Castañeda worked tirelessly to promote an immigration deal and closer cooperation in fighting drug trafficking. He ended Mexico's tradition of warm ties with Cuba in order to back American denunciations of Fidel Castro's human rights record.

Beyond its failure to deliver on immigration, the Bush administration largely missed an opportunity to collaborate with Latin American democracies in dealing with a number of thorny Western Hemisphere matters, most notably the crisis in Venezuela. Angry calls by Mexican farmers in recent weeks for their government to renegotiate the North American Free Trade Agreement in response to the ill-advised agricultural subsidies passed by Congress last summer serve no one's interest, as Castañeda has pointed out. But they are indicative of a broader disenchantment with the United States that cuts across Mexican society. The Bush administration should take note of Castañeda's frustration and seek to improve ties with Mexico.

www.iht.com Eric Pfanner International Herald Tribune Monday, January 13, 2003

Strikes in Venezuela a concern as cartel seeks to assure flow   VIENNA The Organization of Petroleum Exporting Countries agreed Sunday to increase its official production quota in an effort to ease concern over tight global oil supplies and keep a lid on rising prices.

In an emergency meeting here, called to address the effects of anti-government strikes in Venezuela that have cut off most of that country's oil production, members of the cartel agreed to raise their total output quota to 24.5 million barrels a day as of Feb. 1. "OPEC is trying to send a very strong message that it is doing the utmost to ensure adequate supplies," said Abdullah Hamad Attiyah, the OPEC president and Qatari oil minister.

Though the new quota represents an increase of 6.5 percent from the 23 million barrel level set only a month ago, industry analysts said the actual amount of new oil that enters the market may be smaller, meaning any downward effect on prices could be muted. That is because the cartel's sensitive politics required every member to get a proportionately higher share of the quota, even though Venezuela's production will remain only a fraction of its official quota until strike-damaged facilities are repaired.

The only way that OPEC, which pumps about one-third of the world's oil, will be able to make up for Venezuela's lost share in the short term is if other members produce above their set limits, analysts said. In December, total OPEC production fell short of the 23 million barrel limit by several hundred thousand barrels.

OPEC had sought to stamp out so-called quota cheating at its December meeting, when it raised the official quota from 21.7 million barrels per day. But since then, the strikes in Venezuela against the government of President Hugo Chavez, along with concerns about a possible war in Iraq, have pushed prices sharply higher, throwing a wrench into those plans. On Friday, crude oil for February delivery on the New York Mercantile Exchange closed at $31.68 a barrel, down 31 cents from the previous day but still nearly 31 percent above its November low.

"It's hard to put Humpty Dumpty back together again," said Gary Ross, chief executive of the PIRA Energy Group, referring to the effort to clamp down on quota cheating.

Analysts said the increase in the overall quota suggests that OPEC members that can pump more oil - only Saudi Arabia and the United Arab Emirates have significant spare capacity - will do so to some extent, even if their individual quotas are rising only marginally. Saudi Arabia's official level, for instance, rises to 7.96 million barrels per day from 7.48 million, but analysts say it could produce as much as 10 million barrels.

"There is no shortage. We never allowed the shortage to take place," said Ali Naimi, the Saudi oil minister. "There is a significant shortage from Venezuela, but there is no shortage in the international market."

If the official outcome of the meeting was less important than the reality of what happens in the market, then why would OPEC ministers gather in frigid Vienna - the city was blanketed in snow - only one month after their last regular meeting? Appearances matter a great deal, too. Analysts said Saudi Arabia, in particular, was eager to be seen as cooperative at a time when many American conservatives are raising questions about the Saudi commitment to fighting terrorism.

Unusually high oil prices are also not in Saudi Arabia's interest if they contribute to a slowdown in the global economy and thus lower demand for the country's oil reserves.

"They are trying to paint OPEC in a good light," said Leonidas Drollas, chief economist with the Center for Global Energy Studies in London. "The Saudis are trying to ingratiate themselves a bit with the United States."

But OPEC also emphasized that the increase in quotas may be temporary. If Venezuelan production returns to pre-strike levels and a war with Iraq is averted, for instance, the cartel might be faced with a price-depressing oil glut just as seasonal demand wanes in spring.

"We will look very closely at the market and we will continue our consultation," Attiyah said.

The OPEC president said the he had faced no pressure from the United States, the world's largest oil consumer, to do something about rising prices, but hinted that the possibility of a war in Iraq had figured in OPEC's discussions.

"We take all the factors into consideration in determining whether there is a shortage in the market," he said.

Iraq, which is nominally an OPEC member but outside the group's quotas because its production is monitored by the United Nations, stepped in to fill some of the gaps left by the loss of Venezuelan output. Over the last few weeks it has been producing about 2 million barrels a day, Drollas said.

The increased output from Iraq and quota cheating by other OPEC members probably accounts for the fact that U.S. petroleum stockpiles were above predicted levels in the week ending Jan. 3, actually rising by one estimate and falling less than expected by another. Though total OPEC production fell slightly short of the 23 million quota, the relative adequacy of supply helped push down futures prices slightly last week.

Though OPEC insists that it has enough spare capacity to make up for all of the lost production from Venezuela, a war in Iraq could upset the fragile supply-demand balance.

In the event of a war, analysts say the International Energy Agency would probably release some oil from its strategic reserves, held by 26 member nations. And the United States could tap its own Strategic Petroleum Reserve, as President Bill Clinton did in 2000 when prices spiraled.

www.iht.com Ravil Shirodkar and Sri Jegarajah Bloomberg News Monday, January 13, 2003   NEW DELHI Schlumberger Ltd., the largest oil-services company in the world, and rivals said Sunday that they were seeing few gains from oil prices near two-year highs because the producers that hire them to find oil do not expect the rally to last.

A monthlong national strike in Venezuela and a possible U.S. war with Iraq helped oil prices rise 44 percent in London last year. That has failed to prompt Exxon Mobil Corp., Royal/Dutch Shell Group and other producers to bolster spending on survey work and drilling, contractors said.

"We're not seeing a significant increase in business because oil companies don't expect current prices to last," Satish Pai, a vice president at Schlumberger, said at a conference in New Delhi. "Prices are high because of the war premium and Venezuela. Both of those situations could quickly evaporate."

Lower-than-anticipated drilling activity may worsen the drop in earnings at oil-field services companies. Schlumberger's pretax profit from services fell 22 percent in the first three quarters of 2002. Precision Drilling Corp., the biggest Canadian oil-services company, said fourth-quarter income may drop 78 percent. Stolt Offshore of Britain cut its full-year forecast to a loss.

The Organization of Petroleum Exporting Countries was meeting Sunday in Vienna to discuss oil prices and was expected to agree to raise output temporarily to bring prices down.

Producers say the fluctuation in oil prices meant that decisions about long-term investment in exploration were not made just on the basis of current oil prices.

"This business is a cyclical business, and you don't spend a lot when the oil price is high, and you don't cut your costs too deep when the oil price is low," said David McManus, executive vice president of Asia operations at BG Group PLC of Britain, the third-largest natural gas producer.

There is typically a lag of as long as 18 months between a surge in oil prices and new business appearing for service companies, contractors said.

"It can take over a year before oil companies invest in a new rig," said Kazimierz Pietrzyk, the India country manager for Geofizyka Torun of Poland, which is mapping oil fields for Cairn Energy PLC and Reliance Industries Ltd. in India.

Reliance made a major discovery in 2002 off the east coast of India.

Cairn has found oil or gas in nine of 11 wells it dug in India in the past two years.

The French bank Societe Generale predicts that Brent oil in London will average $22 a barrel this year, dropping from an average of $25 a barrel in the first quarter to $21 a barrel in the third, according a report by Frederic Lasserre, head of commodities research at SG Economic Research. "You only have to look at the basic pricing assumptions of the major exploration and production companies to see that they plan for a lower sustained oil price" than $25 a barrel, McManus said at the conference.

Brent oil for February delivery rose Friday in London to $29.67 a barrel on the International Petroleum Exchange. Prices rose above $30 early this month, the highest in two years.

Energy companies will probably spend less on equipment in the United States in 2003 than last year, according to a survey made by Lehman Brothers Inc. last month.

Spending in the United States may fall 0.7 percent to $30.3 billion from $30.5 billion in 2002, the survey of 323 oil and gas companies found. Global investment may gain 4.2 percent to $132.4 billion, after a 1.2 percent drop in 2002. Lehman previously expected both U.S. and global spending to rise 7 percent in 2003.

Petrotech 2003, the biggest oil conference in India, ended Sunday. Indian field could reach 7 billion tons

Oil fields off the Indian east coast may hold as much as 7 billion tons of oil and gas, one-fourth of the country's untapped reserves, a government official said over the weekend.

About 3.5 billion tons of the reserves may be provable by drilling, said Avinash Chandra, director general for hydrocarbons at the oil ministry. Of that, about 500 million tons has already been proven from discoveries by Reliance Industries and Cairn Energy, he said at the conference in New Delhi.

Reliance, India's biggest non-state company, made the discovery in 2002 off India's east coast, the country's biggest find for three decades. Cairn has found oil or gas in nine of 11 wells it has dug in the past two years. India is trying to open up exploration to reduce the need to import fuel.

"The discoveries made by Reliance and Cairn on the east coast only underscore our view" of how much oil and gas is waiting to be found, said Chandra. "The proof of the pudding is in the eating."

Jeffrey E. Garten IHT Monday, January 13, 2003 Get together   PARIS The Bush administration is leaving no doubt that it intends to use America's enormous military power to make the world a safer place. But to succeed, it must develop a more robust global economic policy as well. Unless military confrontations lead to something much better for the millions of people who will be hurt, America will have won the wars and lost the peace. It is true that the administration is aggressively promoting trade liberalization by pushing for new commercial deals with Latin America, as it has recently done with Chile and is now doing in Central America.

It is also pressing for more tariff and quota reductions around the world in an omnibus negotiation that it hopes to conclude within two years under the auspices of the World Trade Organization.

These efforts are an excellent start. But there are at least four broader challenges that the United States should now confront, and with an urgency that the Bush administration has yet to demonstrate. The first is reinvigorating global economic growth. The world economy is in trouble. Corporate investment and trade are slowing, factories are producing more than they can sell, and deflation is threatening many regions. Germany and Japan, are stagnating. Big emerging markets, from Indonesia to Brazil, are in deep trouble.

America's economy is the world's most powerful by far, accounting for almost a third of global demand these days. But even if it grows at a healthy rate this year, the United States by itself cannot create a sustainable international economic recovery.

A U.S. revival depends on the health of American companies, and that in turn depends in part on expanding foreign markets. Overseas sales of American goods and services made up at least 25 percent of U.S. economic growth in the 1990s.

And because many of America's top companies - Intel, Coca-Cola, Johnson Johnson, for example - rely on Europe, Japan and developing countries for more than 30 percent of their revenues, stronger foreign economies are important to the health of U.S. stock markets, the principal financing vehicle for corporate America's expansion.

Washington must bring together its economic partners - the Group of Seven nations made up of Canada and Japan and four in the European Union - to get the global economy moving again.

The United States, which is already running huge budget deficits and has lowered interest rates to levels not seen in generations, has little room to maneuver. But it can encourage the European Central Bank to lower its relatively high interest rates, since inflation on the Continent is not nearly the threat that stagflation is. The European Union must also let up on its growth-constricting demands that Germany, Italy and France restrict spending and, in some instances, raise taxes. The United States and Europe can push Japan to restructure its growth-strangling bank debts. Second, there will soon be an acute need to rebuild countries that are defeated or disintegrating. Estimates for reconstructing Iraq range from $120 billion over 10 years, in the case of a very short war, to $1.2 trillion after a prolonged conflict, according to extensive work done by the Yale economist William Nordhaus. This amount does not include the costs of the administration's vision of spreading democratic and free market institutions in the Gulf region.

The job of economic relief and reconstruction will most likely need to be handled by the United Nations, but substantial American financial support will be essential. Given budget deficits at home, this will be no easy task.

Will this money come from domestic programs or from foreign aid already promised to others? At the least, the Bush administration needs to be working with Congress to incorporate the requirements in planning - something which Mitchell E. Daniels Jr., director of the Office of Management and Budget, has been reluctant to do. One problem is that there is no single agency in Washington capable of overseeing the extensive United Nations efforts that must be mounted. One needs to be created, just as the Economic Cooperation Administration was established in 1948 to oversee the Marshall Plan. Like it or not, we are entering a decade of political and military tension, and nation-building is going to be a major part of America's response. Third, Washington needs to prepare for all-too-possible international economic crises. A major rise in oil prices in reaction to turmoil in Venezuela and Iraq has already begun and could send the global economy into a deep recession. America should be working with the European Union and Japan to release emergency oil reserves if oil prices spiral out of control. It should be encouraging Russia to expand production, too, by promising that it will buy Moscow's supplies well into the future.

Another crisis could involve the dollar, which was down 15 percent against the euro for all of 2002. If the U.S. trade deficit continues to soar and foreigners get nervous, they could dump their dollars.

It would help if Washington could persuade the European Central Bank to lower its interest rates - which it should do anyway to stimulate economic growth - and make the euro less attractive as an alternative to the dollar. Beyond that, Washington, Brussels and Tokyo will have to be prepared to coordinate purchases of the dollar if it goes into free fall.

Latin America could provide the spark for a global financial debacle. After all, Argentina and Venezuela are in deep trouble, and Brazil's economy is fragile at best. In 1997 a currency collapse in Thailand set off a global financial meltdown. Washington and its economic partners had better focus more on what is happening south of the Rio Grande. Finally, the United States will have to give much more attention to helping developing countries, the very nations in which so much of today's turmoil exists, to get a fairer deal from globalization, which has disproportionately benefited rich countries so far.

This means not only negotiating trade agreements but also improving the World Trade Organization's ability to settle trade disputes and to give technical assistance to struggling countries overwhelmed by the blizzard of new trade laws in the last decade.

It also means helping the World Bank and its regional counterparts deal with poverty more effectively, rather than just criticizing their performance, which is what Washington so often does. The Bush administration has never shown much interest in multilateral diplomacy except when other countries press it to the wall, as they have with Iraq. But in the economic realm there is no choice but to seek partners.

In the immediate aftermath of World War II, the United States pushed for the establishment of the IMF and the World Bank, and coordinated the Marshall Plan with European nations. Washington realized that economic stability and prosperity were essential to security. It is true today, too. The writer is dean of the Yale School of Management and author of "The Politics of Fortune: A New Agenda for Business Leaders." He held economic and foreign policy positions in the Nixon, Ford, Carter and Clinton administrations.