ogj.pennnet.com By Paula Dittrick Senior staff writer

HOUSTON, Feb. 18 -- The global oil industry is correct to fear a price drop from current levels and is wise to expect continued volatility during 2003 and beyond, according to Ann-Louise Hittle, Cambridge Energy Research Associates senior director, upstream oil.

During a panel session last week featuring CERA researchers outlining their global energy outlook by region, Hittle said four uncertainties are driving current oil prices: US energy market fundamentals and the economy, worldwide cold winter weather, the labor strike in Venezuela, and fears of war in Iraq.

She presented three 2003 oil price scenarios depending upon whether military action is taken against Iraq.

If there is no war, Hittle predicted an average of $25/bbl for benchmark US West Texas Intermediate on the New York Mercantile Exchange and $24/bbl for North Sea Brent on the International Petroleum Exchange.

"If the US does stage an effective and relatively short, successful war, then prices would average about $29/bbl for the year for WTI and $28/bbl for Brent," she said, adding that this forecast assumes a return of Iraq exports and a gradual return to production capacity. But if the potential war were to turn into a prolonged struggle with numerous casualties, damage to neighboring countries, or very extensive damage to Iraq, she predicted prices would hover around current levels of $35/bbl for WTI.

"We put the downward price risk for the year at about $22/bbl (WTI), if for example, the US economy slips back into a recession, and oil demand growth slows. That would be in the second half of the year," Hittle said.

Downward pressure also would be asserted if "the world were awash in oil in the second half of 2003; however, we don't expect that. We do think the Organization of Petroleum Exporting Countries will cut back on production to keep that from occurring. The market is quite tight."

Beyond 2003 An oil price collapse into the "low teens between now and 2010" would be possible if OPEC fails to hold onto its spare capacity or if Iraq's production returns faster than expected, she said.

Julian West, CERA senior director, oil and environment, said he hopes the oil industry "might see some changes for the better" in coming years despite its chronic problems of an aging workforce, consolidating companies, and shrinking returns.

"If the oil companies do get back into Iraq, they will have access to more potential than anywhere else they are allowed to go," West said, adding he believes assistance from service companies will be vital in Iraq.

For instance when compared to Siberia, Iraq's reserves are easier to develop and produce technically speaking, he said.

"So, it's quite possible to conceive we could see 7 million b/d from Iraq by 2010. This is not a forecast, and it's certainly not the most likely outcome, but it's what we could have if we can get it right with investors," West said.

Worldwide natural gas The next 18 months will be crucial in shaping the future of European power liberalization, said Scott Foster, CERA senior director, European power.

In turn, power liberalization efforts will influence what happens with natural gas demand and price, said Michael Stoppard, CERA director, European gas.

The future of natural gas prices appears robust for the rest of the year even though "the reality in the marketplace feels at odds with the political vision," said Stoppard, adding progress is being made toward more open, competitive markets.

He sees "the sprouting of unbundled pipelines" in Italy, Spain, Belgium, and the UK, adding that he expects that trend to continue.

"The new prize is the UK gas market," Stoppard said, adding he expects the UK to become a net importer of natural gas. Contracts already have been arranged with Norway and with the Netherlands, he said. LNG also will be imported into the UK. The drivers behind LNG projects are reduced costs and improved project execution.

This means that "LNG is ready to move beyond the Mediterranean and improve its market share in cold European markets," Stoppard said. "In late 2002, Russia. . .signaled its own interest in entering UK markets with its proposal to build a pipeline across the Baltic Sea and make its way toward the UK. This symbolizes the threat to LNG in Europe of pipeline gas as pipeline gas wakes up to the new challenge."

New competitive dynamics in 2003 include the first signs of a "price communication or ripple between two markets previously quite unconnected—the current differential between US vs. European gas prices. . . . LNG arbitrage across the Atlantic will indeed be of growing importance in 2003," he said.

Michael Zenker, CERA senior director, North American natural gas, said North American gas imports—which include those into Canada, the US, and Mexico—are going to turn the natural gas industry into a global commodity in which LNG is going to play a critical source.

CERA sees a potential for a North American gas demand of 9 bcfd, or 60 million tons, by 2010.

"But, there are enormous structural challenges to making this LNG potential a reality—capital requirements, contract structure issues, and policy issues," Zenker said. "And, securing natural gas overseas adds a unique geopolitical dimension that is currently not a component at all in the North American natural gas market."

Uncertainly of supply dominates the near-term market as well, he said.

"Quite simply, the North American natural gas market has passed a tipping point. One that we characterize as a point in time in which it became clear that demand was going to outstrip the ability to grow supply," Zenker said.

North American gas supply has become less responsive to price than in recent history, he said.

"The demand that we see is going to be greater than the supply outlook that we have outlined for the next few years. . . . We see the gas market very tight at least for the next 24 months—tighter than at any other time in contemporary history," Zenker said.

Contact Paula Dittrick at paulad@ogjonline.com

www.upi.com By Owain Johnson UPI Business Correspondent From the Business & Economics Desk Published 2/18/2003 1:08 PM

CARACAS, Venezuela, Feb. 18 (UPI) -- U.S. company ChevronTexaco and Norway's Statoil will soon be gearing up to develop part of Venezuela's giant offshore gas deposits, after having received licenses from the government.

The companies received development blocks in the Plataforma Deltana gas field, which is situated in Venezuelan coastal waters adjacent to the country's maritime border with Trinidad and Tobago.

Venezuela has proven natural gas reserves of 147 trillion cubic feet, or tcf, the eighth-largest in the world. The Plataforma Deltana field is estimated to hold at least 38 tcf.

The two successful companies will seek to export most of the gas to the United States, which analysts estimate will require an additional 40 tcf of gas by 2020.

The Venezuelan authorities had divided the gas-field into five blocks. Statoil was awarded Block 4, while ChevronTexaco was awarded Block 2. British Petroleum is still in negotiations to secure Block 1, while Block 3 was withdrawn after failing to attract a large enough bid.

Block 5 has not yet been put up for auction. The block is the largest and most complex of the concessions and several technical questions still remain to be resolved.

Venezuelan President Hugo Chavez attended the signing of the agreement and spoke at great length of his satisfaction that major international investors were still flocking to the oil-rich country despite its difficult political and economic situation.

"This is a historic act," the president said. "Venezuela will become a world power in gas production."

He hailed the deals as a victory over his political enemies, whom he described as "coup-mongers, fascists and terrorists." The president has just survived a two-month general strike launched by the opposition in an attempt to force his resignation.

The agreements were, however, somewhat anti-climactic compared with the announcement of the favored bidders in August. At that time, hopes were high that more companies would be involved in the development of the gas-field and that the auction would raise vast sums for Venezuela.

Since the August ceremony, the BG Group, formerly British Gas, pulled out of the bidding process, while France's TotalFinaElf offered only $100,000 for Block 3, leading the government to withdraw the block from the auction.

Statoil offered $32 million for its block, while ChevronTexaco offered $19 million for its exploration and development license, making it unlikely the government will meet its prediction that $1.1 billion will be invested in gas projects in 2003.

The fall-off in demand for the licenses has been blamed on a combination of lower international gas prices and a clause in the concession contracts that allows state-owned energy producer Petroleos de Venezuela, or PDVSA, to take a stake of up to 35 percent in the projects.

PDVSA was badly hit by the recent general strike, and having sacked around a third of its staff for observing the stoppage, few international companies are likely to view it as an ideal partner for a long-term venture.

The disappointing bids for the Deltana blocks had led some opposition figures to accuse Chavez of selling Venezuela's reserve off cheaply for short-term political advantage.

ChevronTexaco's representative in Latin America, Ali Moshiry, drew applause at the ceremony when he dismissed allegations of malpractice by the Venezuelan government.

"ChevronTexaco can assure you that the process has been transparent and has observed all applicable laws," he said. "If its integrity had been suspect, ChevronTexaco would not have taken part."

The successful companies will spend the next two to three years exploring their concessions and designing a commercial production program. The first gas from the fields should reach the United States in late 2007 or early 2008.

The Venezuelan government hopes the Plataforma Deltana project will spark a revival in the country's crisis-hit industrial sector as well as giving PDVSA the technical know-how to carry out other offshore operations.

Under the terms of the agreement, the partner companies must source a significant percentage of their pipeline and other hardware from Venezuelan companies and share technical knowledge with PDVSA.

The state-owned company lacks offshore experience since its operations have previously been confined to Lake Maracaibo, and the government hopes that by learning from its foreign partners, PDVSA will eventually be able to bid for offshore projects in Colombia, Mexico and Brazil.

PDVSA is placing great emphasis on raising natural gas output, after a company study suggested gas will account for one third of total world energy demand within the next 20 years.

One of the main advantages of natural gas to Venezuela is that unlike Venezuelan petroleum, gas isn't covered by any quota pact, such as that operated by the Organization of Petroleum Exporting Countries. This will allow PDVSA and its partners to boost gas production in line with any growth in the world market for gas.

reuters.com Tue February 18, 2003 11:11 AM ET By Tom Ashby

LONDON (Reuters) - Oil prices rose toward two-year highs on Tuesday as the United States and Britain pushed for a second U.N. resolution on Iraq that could open the way to war on the world's eighth largest oil exporter.

Biting cold weather in the northeastern United States drove strong buying in heating oil futures, which also pulled up the value of crude.

International benchmark Brent crude oil rose 38 cents to $32.30 per barrel, within a dollar of its two-year high of $33.10 hit last week.

U.S. crude futures, which were closed on Monday for the Presidents' Day holiday, fell 12 cents to $36.68, catching up with Brent's slide on Monday.

"Heating oil is leading this market up, which is not surprising given the weather in the (U.S.) northeast," said Christopher Bellew of brokers Prudential-Bache International.

The White House said it could propose a new U.N. resolution calling for Iraq to disarm as soon as this week, much earlier than previously expected.

"It could take place as soon as this week. It could be next week. The timing will be determined as a result of the ongoing conversations within our government and with the allies," White House spokesman Ari Fleischer said.

European Union leaders closed ranks on Monday to warn Iraq that United Nations arms inspections could not go on indefinitely without Baghdad's cooperation and declared for the first time that war could be the last resort.

But the 15 leaders, bitterly divided over the Iraq crisis, failed to agree on how much time Baghdad should be given to rid itself of suspected weapons of mass destruction.

"An attack at the end of February through to the middle of March still seems almost inevitable," said Lawrence Eagles of brokers GNI.

Iraqi Foreign Minister Naji Sabri urged Arab nations to use their massive oil wealth as a weapon against war.

A similar plea fell on deaf ears last April, when Iraq urged an embargo to protest against Israeli violence against Palestinians.

The Arab-dominated Organization of the Petroleum Exporting Countries, whose members have hiked output to cover for shortages from strike-hit Venezuela, has vowed to do its best to cover any shortfall in Iraqi supply.

OPEC will probably suspend oil output quotas temporarily and pump at will in the event of war cutting off Iraqi supplies, an OPEC source said on Monday.

BAD WEATHER, STRIKES

After a series of severe storms in the U.S. northeast already this winter, the world's largest heating oil market was again battered by Artic cold this week.

Heavy blizzards hit New England on Monday, closing most major airports between Washington and New York. The storm should boost heating oil use, but will also dampen gasoline demand as motorists stay at home.

The threats to supply and strong demand come at a time of record low inventories in the United States, drained by a prolonged strike in Venezuela.

Once the world's fifth largest exporter, Caracas is battling an opposition strike which has crippled the oil industry and slashed exports.

Output there is still only half its normal three million barrels per day, while Nigerian oil workers threatened to cut off exports from Africa's top producer in a strike that began on Saturday.

Blue-collar Nigerian oil workers joined a strike by white-collar workers on Tuesday, but oil companies managed to maintain exports using senior staff to replace strikers.

Talks on ending the strike have been postponed by one day to Wednesday to ensure fuller attendance, officials said on Tuesday.

new.stockwatch.com 2003-02-18 12:41 EST - News Release

ST. PETERSBURG, Fla., Feb. 18 /PRNewswire-FirstCall/ -- Citing rising prices for fuel used to generate electricity, Progress Energy Florida (formerly Florida Power) will today request an increase to the price customers pay for electricity. Progress Energy does not profit when prices increase due to higher fuel costs. The costs are a direct passthrough to customers.

(Photo: www.newscom.com )

Progress Energy's residential customers currently pay $80.35 per 1,000- kilowatt hour (kWh), 10 percent below the national average. If the request is approved by the Florida Public Service Commission (FPSC), the fuel adjustment will increase residential bills by 4.2 percent -- to roughly $83.71 -- beginning April 1, 2003. A decision is expected from the FPSC in March.

"Considering the state of potential conflicts in the Middle East and government unrest in Venezuela, fuel prices are expected to remain high into the foreseeable future," said Bill Habermeyer, president and CEO of Progress Energy Florida. "We will do everything we can to control these costs, but we also encourage customers to make efficient use of electricity and conserve whenever possible."

While time remains before the summer air conditioning and peak electric use season arrives, Progress Energy urges customers to maximize energy efficiency and conservation to help mitigate the impact of higher fuel prices.

Progress Energy offers these tips to help customers keep their energy costs down:

• Set the air conditioning system (which is the largest user of electricity) thermostat to 78 degrees in summer months. * Make monthly inspections of air conditioning system filters for the purpose of cleaning or replacing them when needed. * Reduce the temperature setting on the electric water heater to 120 degrees. * Use ceiling and portable fans to keep air circulating. * Close blinds, drapes and shades during the hottest part of the day. This keeps the sun's rays from heating your house. * If you have a pool, limit the time your pool pump runs to six hours a day during the summer.

Residents can also take advantage of Progress Energy programs designed to help customers control electricity use. For more information about these programs, customers should visit www.progress-energy.com or call 1-800-700-8744. Some of these programs include:

Budget Billing: Customers on fixed incomes or others who need a bill that is a consistent amount are encouraged to take advantage of Budget Billing. The program is free and helps customers forecast monthly energy costs as well as better plan their finances. Customers pay an average amount that is approximately the same each month. The difference between the budget billing amount and the actual amount also appears on the bill.

Home Energy Inspection: A free home energy inspection can be conducted for customers by a Progress Energy representative. The representative will survey your home's insulation, duct work, water heating, cooling and heating systems and overall efficiency. Then the customer is provided with energy-saving recommendations and practices and other cost-effective, energy-saving measures.

Progress Energy Florida, a subsidiary of Progress Energy , provides electricity and related services to more than 1.4 million customers in Florida. The company is headquartered in St. Petersburg, Fla., and serves a territory encompassing over 20,000 square miles including the cities of St. Petersburg, Clearwater, as well as the Central Florida area surrounding Orlando. For more information about Florida Power, visit the company's Web site at: www.progress-energy.com. Photo: NewsCom: www.newscom.com AP Archive: photoarchive.ap.org PRN Photo Desk, 888-776-6555 or 212-782-2840 Progress Energy, Inc.

CONTACT: Corporate Communications of Progress Energy, +1-866-520-NEWS -6397

Web site: www.progress-energy.com

reuters.com Tue February 18, 2003 10:09 AM ET (Adds details, CEO quotes in paragraphs 5-6, 8-10, 12-13, 17-20; updates share price in paragraph 14)

By John Acher

OSLO, Feb 18 (Reuters) - Norway's biggest oil and gas group Statoil STL.OL reported stronger underlying fourth-quarter results on Tuesday, spurred by higher production, and said it was on target to meet its goals for 2004.

October-December earnings for Statoil, the biggest Nordic company in terms of 2002 turnover, ahead of Finnish mobile phone maker Nokia NOK1V.HE , were boosted by higher oil and gas output, lofty oil prices and currency gains.

Fourth-quarter operating profit for the state-controlled group rose to 11.20 billion Norwegian crowns ($1.60 billion) from 9.47 billion a year earlier.

The result slightly undershot analysts' average expectation for quarterly earnings before interest and tax (EBIT) of 11.65 billion crowns, but was well within the range of estimates.

On the pre-tax level, quarterly earnings beat the average expectation by rising to 13.84 billion crowns from 8.79 billion.

Gas output in particularly was strong, with record volumes both for the quarter and the full year, Statoil said.

"The result for 2002 shows that we're well on our way to achieving our goals for 2004," Statoil said in a statement. It did not give an earnings outlook for this year but said oil and gas output would dip this year before growing again.

"The reasons we have a good result are pretty basic -- higher production, good regularity (of operations), lower costs and improvement on all the key ratios that we are following," Chief Executive Olav Fjell told an analyst conference.

"We are one step closer to meeting the targets that we defined for 2004 and also the (production) volume target for 2007," he said.

The company forecast output would dip to 1.06 million barrels of oil equivalent per day in 2003 from 1.07 million last year, before rising again to 1.12 mboe in 2004 and climbing to 1.26 mboe per day in 2007.

Statoil said normalised return on average capital employed, a key profitability gauge, rose to 10.8 percent in 2002 from 9.5 percent a year earlier, towards a goal of 12 percent for 2004. Fjell said Statoil was the most profitable firm in its peer group in terms of return on capital employed, and he showed Statoil heading a list of 10 rivals including Shell RD.AS SHEL.L , BP BP.L , ExxonMobil XOM.N , Occidental OXY.N , ChevronTexaco CVX.N , ConocoPhillips COP.N and others.

"Measured on return on average capital employed, we have the best numbers for 2002," Fjell said. But he acknowledged that the market had been especially tough on downstream competitors.

Shares in Statoil traded up almost one percent at 53.00 crowns at 1450 GMT, slightly outpacing a 0.6 percent rise in the Oslo benchmark index .OSEBX but lagging a stronger DJ Stoxx energy index .SXEP .

During the past 12 months, the stock has gone from a high of 73.50 in April to an all-time low of 49.60 in late November.

"It was a strong report. I don't think market players will change their estimates after this," analyst Lars Marius Furu at Handelsbanken Capital Markets said after the presentation.

INCREASING INTERNATIONALISATION

With prospects on the Norwegian shelf diminishing, Statoil is increasingly looking abroad, and Fjell said overseas reserves would eventually exceed 50 percent. But he did not say when.

Statoil's 2004 production goal of 1.12 mboe per day assumes that one million of that will be produced on the Norwegian shelf and 120,000 from operations abroad. But international production is seen rising to 260,000 boe per day by 2007, while Norway production would hold stable at a million.

"This is a pretty steep increase -- it means that international production will almost double three times between now and 2007," Fjell said. "Our idea is that our expansion will come abroad, and the Norwegian shelf will be the basis for it."

Statoil's international operations include an Iranian gas field, with significant projects also off Angola, Nigeria and Venezuela.

Fourth-quarter oil and gas production rose seven percent year-on-year to 1.17 million barrels of oil equivalent (mboe) per day, in line with the firm's guidance. Full-year oil and gas output also grew seven percent.

Statoil said it would have six new fields in production by late 2003, but estimated 2003 gas sales would ease to 19 billion standard cubic metres this year from 19.6 billion last year.

Statoil's full-year earnings per share adjusted for special items rose to 7.72 crowns from 7.32 a year ago. It proposed a dividend of 2.90 crowns per share versus 2.85 crowns for 2001.

Full-year revenues rose to 243.81 billion Norwegian crowns ($34.77 billion) from 236.96 billion, just ahead of Nokia's 30.1 billion euros ($32.27 billion) for 2002.

(Additional reporting by Inger Sethov and Ola Peter Krohn Gjessing in Oslo)