www.alertnet.org 14 Jan 2003 21:29

CARACAS, Venezuela, Jan 14 (Reuters) - The 335,000 barrel per day (bpd) Curacao Isla refinery, shut last month due to a 44-day oil strike in neighboring Venezuela, may begin to restart operations next week, a plant spokeswoman said.

The plant, which is run by Venezuelan state oil firm Petroleos de Venezuela (PDVSA), was forced to shut in December because oil tankers were not receiving instructions from striking PDVSA staff.

Product tanks bulged with fuel that could not be exported, but stock levels have since been drained as replacement PDVSA employees nominated vessels to deliver some stored products to Venezuela.

"We've been reducing inventories and the situation is no longer critical. We are waiting to get commitments to take the products," the spokeswoman told Reuters.

Officials at the Isla refinery say the plant could begin processing next week when planned maintenance on one unit was completed, she added.

Isla normally processes around 200,000 bpd of Venezuela crude into products for PDVSA customers in the Caribbean and Central America.

However, PDVSA has been planning to import products from the restarted Curacao refinery to Venezuela, where the strike by opponents of President Hugo Chavez has forced the world's No. 5 oil exporter to purchase fuel abroad.

Runs in Venezuela's 1.3 million bpd refining system have been cut to 75,000 bpd due to the strike, which has the support of thousands of PDVSA workers.

www.upi.com By Carmen Gentile UPI Latin America Correspondent From the International Desk Published 1/14/2003 5:01 PM

SAO PAULO, Brazil, Jan. 14 (UPI) -- South American leaders readied themselves Tuesday for upcoming meetings in Ecuador that will focus on efforts at ending the weeks-long general strike that has crippled neighboring Venezuela.

Many of the continent's presidents will be on hand in Quito for the inauguration of Ecuador's new president, former Col. Lucio Gutierrez.

While Gutierrez's ceremonial ascension will dominate the local media, international eyes will likely focus on leaders' discussion whether to officially form a regional, multi-national "Friends of Venezuela Group" (Grupo de Paises Amigos da Venezuela) to help bring a peaceful end to the strike, daily protests and clashes between supporters and detractors of President Hugo Chavez.

The proposed coalition is the brainchild of new Brazilian President Luiz Inacio Lula da Silva, a leftist with strong ties to Chavez. Opponents of the Venezuelan president allege he has taken the nation too far to the left at the expense of the economy.

Other prominent leaders expected to attend are Colombia's Alvaro Uribe and Argentina's Eduardo Duhalde.

The Lula-led meeting of regional leaders has, however, drawn the ire of Washington, which had hoped to form its own "Friends of Venezuela" group to end the more than 40-day strike that has severely handicapped Venezuela's oil production capabilities.

A Washington Post article last week noted the Bush administration was hoping to head off the left-leaning Lula government's initiative, adding U.S. and foreign diplomatic sources were concerned that the effort would ultimately be counterproductive.

The U.S.-led effort would include Brazil, as well as the United States, Mexico, Chile and possibly Spain, and a representative of U.N. Secretary General Kofi Annan, the Post said.

U.S. State Department spokesman Richard Boucher recently explained the Bush administration's position on regional intervention in Venezuela.

"We don't think there needs to be some separate group of friends formed," he said.

Lula, as he is known, has maintained a non-adversarial, diplomatic position on the U.S. stance while moving ahead with the proposed meeting. His presidential spokesman, Andre Singer, said Tuesday the Friends of Venezuela Group "would be to support the negotiation effort by Organization of American States Secretary General Cesar Gaviria, to resolve the crisis in that country."

Gaviria had been mediating talks between the government and opposition leaders in recent weeks with little success. The effort is currently at a standstill due to a disagreement regarding the possible ouster of Chavez.

Singer also said Brazil's new Foreign Relations Minister Celso Amorim had spoken to Secretary of State Colin Powell about the upcoming meeting, though didn't expand on the specifics of the leaders' discussion.

"There is a convergence of opinion concerning the need to overcome the crisis in Venezuela," he said, but did not elaborate.

The Bush administration initially appeared apprehensive about interfering in the Venezuela crisis. Last spring, Washington came out in support of Chavez's ouster, only to have the Venezuelan president return to power a few days later.

But now it appears Bush is becoming increasingly interested in ending a strike that has denied the United States the more than 1 million barrels of oil a day it was receiving from Venezuela.

Despite the U.S. desire to play a role in ending the strike, Venezuela doesn't appear close to reaching a solution any time soon.

Chavez has been adamant about not bowing to opposition calls for him to step down and on Tuesday ordered soldiers to seize weapons from the Caracas police force, alleging they were siding with his detractors.

www.alertnet.org 15 Jan 2003 01:23

(Updates with Chavez comments)

By Pascal Fletcher

CARACAS, Venezuela, Jan 14 (Reuters) - One person was shot and wounded in clashes between rival Venezuelan protesters and police on Tuesday as President Hugo Chavez condemned leaders of a six-week-old opposition strike as "terrorists" and said he would not negotiate with them.

Chavez's comments indicated an apparent hardening of his government's position on the 44th day of the strike -- called to press the leftist leader to quit and hold early elections -- that has crippled oil output in the world's No 5 exporter.

The president spoke after scattered skirmishes in west Caracas, in which police fired tear gas and shotgun pellets to repel groups of pro-Chavez militants hurling rocks and bottles who moved to attack a march by anti-government protesters.

Chavez said the opposition could not be seen as having the same legitimacy as his government.

"We know it's not like that ... What we have here is a constitutional government facing subversion," he said at a ceremony to receive new leaders of the National Assembly.

He condemned his opponents as "elite and privileged sectors" which he said were bent on overthrowing him. "You can't negotiate with terrorists,' he said.

He was due to fly later to Quito to attend the inauguration Wednesday of Ecuador's new president, Lucio Gutierrez.

In Tuesday's clashes -- the third consecutive day of street violence -- Chavez supporters, some of them masked, stoned reporters, smashed the facade of a McDonald's restaurant and threw a Molotov cocktail at a TV news van, witnesses said.

One man was hit in the leg by a bullet but it was not clear who had fired it, city fire chief Rodolfo Briceno said.

Fighting to keep the two sides apart, police also used tear gas against some of the opposition protesters.

"FICTIONAL STRIKE"

Earlier, Vice President Jose Vicente Rangel told foreign correspondents the government aimed to rule until its term ended in 2007. "It's a 'fiction' strike, carried out by people who are obsessed with the idea that by staging a strike, they can get rid of Chavez," Rangel said.

He denied that the shutdown, which has closed many private businesses and caused shortages of gasoline and some food items, had created chaos. "The country is working," he said.

The country's bolivar currency <VEB=> fell 3.2 percent against the U.S. dollar on Tuesday to 1,612.50 bolivars. It has lost about 13 percent of its value this year.

Rangel condemned the oil industry disruption, which has cost the country $4 billion in lost revenue, as "sabotage" and "terrorism." The government has fired 2,000 striking state oil employees and is struggling to restore the industry to normal.

Rangel said the government objected to opposition plans to hold a nonbinding referendum on Feb. 2. Dismissing the poll as "unconstitutional and politically useless", he said the constitution only allowed for a binding referendum on the president's mandate after Aug. 19.

The government has appealed to the Supreme Court against the planned referendum, but Rangel said it would respect whatever decision the court took. Chavez has said he will not resign even if he massively loses the February poll.

Chavez's foes say he is trying to install a Cuban-style communist system. The opposition includes business and union leaders, striking oil executives and rebel military officers.

In a bid to break the deadlock, the United States and other countries are moving to set up a "friendly nations" group to back efforts by the Organization of American States to broker an agreement on elections. Mexico and Argentina said on Tuesday they were willing to form part of such a group.

The Venezuela crisis has helped push oil prices to two-year highs of over $30 a barrel as the market frets over supplies at a time when Washington is preparing a possible war in Iraq.

Before the strike, the United States had been receiving more than 13 percent of its oil imports from Venezuela.

(Additional reporting by Patrick Markey)

ogj.pennnet.com Maureen Lorenzetti Washington Editor

WASHINGTON, DC, Jan. 14 -- New York state Jan. 6 formally asked the US Environmental Protection Agency to waive a federal clean air rule that requires fuel suppliers to sell reformulated gasoline (RFG) with an oxygenate, typically ethanol or methyl tertiary butyl ether .

"In order to continue with the progress already being made in reference to the removal of MTBE contamination, New York wants to remove the minimum oxygen requirement in RFG," wrote New York Department of Environmental Conservation Commissioner Erin Crotty to EPA Administrator Christine Whitman.

Crotty said that New York is concerned that smog levels may increase if fuel suppliers are forced to replace MTBE with ethanol to meet the oxygen standard.

The commissioner also cited ethanol transport as an additional burden to suppliers. She said that regional clean air officials estimate that transporting 22.9 million bbl/year of ethanol to New York and surrounding Northeast states could require as many as 34,000 miles of barge travel and as many as 3 million miles of truck travel.

History In June 2001, EPA rejected California's petition to obtain a waiver of the 2wt % oxygen requirement for RFG.

Both New York and California next year are banning MTBE because of groundwater contamination concerns. Connecticut has an MTBE ban that will take effect in October. Washington state's ban is also scheduled for this year. An earlier MTBE ban in Arizona expired in 2001. Five other states— Colorado, Nebraska, South Dakota, Minnesota, and Iowa—already have bans on MTBE. Meanwhile, Kansas, Illinois, and Indiana, like California and New York, have bans that will activate in 2004. By 2006, a total of 16 states plan to have bans in place, according to American Petroleum Institute data.

EPA rejection Shortly after EPA rejected California's request, the state filed a lawsuit against the agency. The National Petrochemical & Refiners Association also filed an amicus brief in support of California.

NPRA's brief says that the "real-world impact" of EPA's decision to deny the California waiver request "is to establish an ethanol mandate for RFG within California. NPRA officials also reminded the court of the decision in API and NPRA vs. EPA, which struck down EPA's 1994 attempt to impose a nationwide ethanol mandate in RFG.

Fuel suppliers in both the Northeast and California have told EPA that they are worried about the impact of MTBE bans on fuel supply if they must use ethanol to comply with current clean fuel rules.

Ethanol suppliers meanwhile say there will be enough product to replace MTBE and that EPA should reject New York's waiver request.

"We would oppose the waiver because the only way EPA can grant a waiver is if it determines in this case ethanol blends would prevent New York from meeting air quality (standards) and that's not accurate," said Monte Shaw, a spokesman for the Renewable Fuels Association.

California picture According to the California Energy Commission, most refiners in that state have started early MTBE phase-outs. ConocoPhillips, they said, has already been producing the majority of its gasoline for blending with ethanol. Royal Dutch/Shell Group, ExxonMobil Corp., BP PLC, and Kern Oil Co. earlier said they planned to stop blending MTBE and switch to ethanol a year before the current Dec. 31 deadline.

Meanwhile, ChevronTexaco Corp. announced this week that it would be producing gasoline with ethanol in Southern California. Valero Marketing & Supply Co., Tesoro Refining & Marketing Co., and ChevronTexaco in Northern California are the only refiners who have decided to adhere to the governor's revised phase-out date, although limited production of gasoline for blending with ethanol may occur, CEC said.

Ethanol marketers say shipments began arriving in December, and production of a specially tailored California clean fuel is already under way at 9 of the 13 refineries that produce RFG. CEC says that 60-70% of the state's gasoline production is expected to contain ethanol by the end of January, which would represent an ethanol demand of 37,000-43,000 b/d.

MTBE bans A recent API analysis shows that current and anticipated state MTBE bans could put undue pressures on fuel delivery systems in the coming years, creating temporary fuel shortages and price spikes.

Barring a legislative fix by Congress or a change of heart by EPA, more than half of the estimated 159,000 b/d of ethanol production (2.7 billion gal/year) will have to be shipped to either coast later this year.

Currently, the Midwest uses nearly all of that capacity, according to API. Without that ethanol volume, Midwest refiners will have to replace missing barrels in a market that could be facing other supply pressures because of disruptions in Venezuela and Iraq.

Suppliers are hoping that, given the unsettled short-term nature of world oil markets these days, the White House may step in and encourage EPA to reverse itself on California and allow Northeast states the same flexibility. California fuel marketers recently urged the agency to consider allowing them to use both MTBE and ethanol in fuel for an unspecified period while the state makes the transition to all ethanol-blended RFG.

Contact Maureen Lorenzetti at Maureenl@ogjonline.com.

www.forbes.com Reuters, 01.14.03, 4:00 PM ET

(The following statement was released by the rating agency) NEW YORK, Jan 14 - Standard & Poor's Ratings Services today further downgraded its ratings on U.S. refining and marketing company PDV America Inc. and its indirect, wholly-owned subsidiary CITGO Petroleum Corp. The ratings remain on CreditWatch with negative implications where they were placed on Dec. 10, 2002.

Tulsa, Okla.-based PDV America has approximately $2 billion in debt and capital lease obligations outstanding.

"The ratings downgrade reflects the deterioration in PDV America's credit quality as a result of the crippling of the oil export capacity of its ultimate parent, Petroleos de Venezuela S.A. (PDVSA), the national oil company of Venezuela," said Standard & Poor's credit analyst Bruce Schwartz.

As its crude oil production has fallen from about 2.8 million barrels per day to less than 500,000 barrels per day, PDVSA has declared force majeure on crude supply arrangements with CITGO that contain margin stabilization provisions that fortify CITGO's credit quality. (CITGO purchased about half of its crude oil under these arrangements.)

The reduced volume of crude supplied under these contracts is diminishing the profitability and cash flow generation of CITGO's refineries by forcing it to refine alternate crude oils that have less attractive margins. Crude runs, to date, have not been affected at CITGO Lake Charles and Corpus Christ refineries, although runs at its Lyondell-CITGO joint venture have been cut.

In addition, the purchasing of alternate supplies is increasing working capital requirements at CITGO because the trade credit terms on open market purchases are worse than those on purchases under its crude supply agreements with PDVSA. Given the nature of the political conflict within Venezuela and the capital and lead times required for PDVSA to restore PDVSA's crude oil production, Standard & Poor's believes that crude shipments may not normalize for some time. Furthermore, CITGO's working capital requirements could increase in the interim if oil prices were to rise due to events surrounding a likely war with Iraq.

Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

Standard & Poor's will be hosting a seminar titled, "Determining Corporate Credit Quality in a Volatile Environment," on Feb. 2-4, 2003, at the Grand Floridian Resort & Spa, Orlando, Fla. Standard & Poor's senior analysts and invited industry leaders from the corporate, banking, and investment communities will discuss trends and current issues related to corporate credit quality.