www.chron.com Feb. 22, 2003, 6:43PM By TONY SMITH New York Times

SÃO PAULO, Brazil -- With crude prices edging toward $40 a barrel and a shortfall looming in world production, South America's two main oil producers, Petrobras of Brazil and the Spanish-owned Repsol YPF of Argentina, might be forgiven for spotting a silver lining among the clouds of war gathering over Iraq.

Remote from the potential combat zone and convenient to the United States, both companies could find ready buyers for stepped-up oil exports and give the economies of their home countries a welcome injection of fresh petrodollars.

But in fact, analysts say, neither company can expect to reap a windfall because of economic volatility, changing government regulations and growing political pressure to keep a lid on fuel prices at home.

Energy analysts say a war in Iraq and the continuing instability in Venezuela could combine to depress world daily oil production by 3.5 million barrels, to about 73 million barrels. Most OPEC nations are already running close to full capacity, so the shortfall would have to be made up by non-OPEC suppliers.

Increased output in Russia and Norway would probably fill part of the gap; the remainder is where the opportunity lies for Latin producers like Mexico, Brazil and Argentina.

"Anyone who is producing will benefit from higher prices," said George Beranek, an analyst at PFC Energy in Washington. "Petrobras and YPF will also benefit, provided they can get the world price."

That last proviso is crucial.

With the advent on Jan. 1 of a new left-leaning government in Brazil, Petrobras appears likely to lose some of the autonomy it has won over the last decade, especially regarding prices. The Brazilian state owns 56 percent of the voting shares in Petrobras and names its top management.

President Luiz Inacio Lula da Silva made two political appointments that will effectively tame Petrobras: A little-known senator, Jose Eduardo Dutra, will take over the company's presidency from the market-friendly Francisco Gros, and Sergio Gabrielli, an academic economist with little commercial experience, will become chief financial officer.

Petrobras' refinery prices for fuel are now 23 percent lower than those in the United States, a situation that the company cannot maintain indefinitely. To run its refineries efficiently, it must import some lighter oil to mix with its own heavy crude and pay the going world rate for the imports.

Gabrielli said Thursday that Petrobras would "alter prices as soon as possible," but that a recent surge in inflation might prevent the government from allowing any price increases for a while.

Despite its dependence on imports of light crude, Petrobras, Brazil's largest industrial company, has grown rapidly to become an aggressive player in global markets. Last year it was Brazil's top exporter, with much of its success coming in refined products rather than crude.

In January, it was able to double its exports of gasoline, mainly to the United States, after supplies from Venezuela all but ceased because of a nationwide strike against President Hugo Chavez.

Petrobras is producing more oil than ever -- 1.62 million barrels a day early this month. According to Fabiana Fantoni, oil analyst at Tendencias, a São Paulo-based consultancy, and it has room to expand its exports of 235,000 barrels a day by about 8 percent.

Doing so might bring in $500,000 a day in extra profits, Fantoni estimated -- "not an extraordinary increase, but it would certainly be good for Brazil's trade balance."

Still, she said, "Petrobras could increase its profits greatly if it kept its pricing at international levels." Though it stepped up production last year, Petrobras posted an 18 percent drop in net profits, to $2.25 billion for 2002.

After years of trade deficits, Brazil recorded a $13.2 billion surplus last year, offsetting a slide in foreign direct investment, which had financed past deficits.

At the moment, though, tackling inflation seems to be the government's prime concern. The central bank has raised interest rates twice this year, despite da Silva's campaign pledges for easier credit.

Unlike Brazil, Argentina is a net oil exporter. But it is still gingerly recovering from a four-year economic slump that broke the Argentine peso loose from its dollar-pegged moorings and upended the country's politics. And like his Brazilian counterpart, President Eduardo Duhalde has pressed his country's oil companies to limit their exports and hold the line on domestic prices to nurture the fragile domestic market.

So Repsol YPF "can only export a certain part of its production," said Ian Reid, oil analyst at UBS Warburg in London, "and there's a question mark over whether it can pass on price hikes to consumers."

What oil it can ship abroad does not earn the company what it might: There is a 20 percent tax on exports and regulations saying that at least 30 percent of export revenues must be brought back to Argentina to be spent or invested.

At one point, the central bank thought the figure should be 100 percent. According to an official at another oil company in Buenos Aires, there is widespread concern in the industry that the economy minister, Roberto Lavagna, wants to increase the export tax rate now that world crude prices are above $35 a barrel.

In January, Argentine oil companies reached an agreement with the government to freeze prices for three months and to supply crude to Argentine refineries at $28.50 a barrel, well below the current world price. Repsol YPF has been leading the oil sector's negotiations with the government.

examiner.com Publication date: 02/21/2003 BY CHRISTOPHER TOOTHAKER Associated Press

    CARACAS, Venezuela -- Thousands of angry government opponents chanting "This is a dictatorship!" rallied in the capital's streets Thursday, protesting the midnight arrest of a strike leader by secret police.

    But President Hugo Chavez proclaimed that he authorized the arrest of Carlos Fernandez even though it threatened to reignite massive demonstrations and again paralyze the country.

    "One of the coup plotters was arrested last night. It was about time, and see how the others are running to hide," Chavez said at the foreign ministry. "I went to bed with a smile."

    Chavez said judges should not "be afraid to issue arrest warrants against coup plotters."

    Fernandez, head of Venezuela's largest business federation, Fedecamaras, was seized by about eight armed agents around midnight Wednesday as he left a restaurant in Caracas' trendy Las Mercedes district, said his bodyguard, Juan Carlos Fernandez.

    The agents fired into the air when patrons tried to prevent the arrest, the bodyguard said.

    Carlos Fernandez faces charges of treason and instigating violence for leading the two-month strike that began Dec. 2, seeking to oust Chavez and force early elections.

    The strike ended Feb. 4 in all sectors except the critical oil industry. Before the strike, Venezuela was the world's fifth-largest petroleum exporter and a major U.S. supplier.

    Government allies warned that more than 100 opposition leaders, from labor bosses to news media executives, who supported the strike could be arrested.

www.guardian.co.uk Friday February 21, 2003 6:10 PM

CARACAS, Venezuela (AP) - Police searched for the leader of Venezuela's largest labor group Friday after President Hugo Chavez authorized his arrest on treason charges for his role in a general strike that disrupted the economy and the nation's oil industry.

Carlos Ortega, president of the Venezuelan Workers Confederation, remained in hiding after strike co-organizer Carlos Fernandez, head of the nation's largest business group, was arrested and charged with treason Thursday.

Dozens of national guardsmen in riot gear stood guard outside as Fernandez made his first appearance in court Friday.

His arrest threatened to spark more turmoil in a country struggling to recover from the strike, which opposition leaders had hoped would force Chavez to resign or call early elections.

Thousands of people around Venezuela protested the Fernandez's arrest, and nine people were injured during clashes with police in the central city of Valencia.

Further protests were planned for Friday.

Opposition negotiators urged the Organization of American States, the United Nations and the Carter Center, run by former President Jimmy Carter, to send representatives to condemn the government's actions and revive talks aimed at organizing a new election.

The U.S. State Department said the arrest of strike leaders would lead to more political violence in the world's fifth leading oil-exporting nation.

President Chavez has labeled strike organizers as ``coup plotters'' and appeared unfazed by the opposition reaction to the arrest orders.

One of the coup plotters was arrested last night. It was about time, and see how the others are running to hide,'' Chavez said Thursday. I went to bed with a smile.''

Chavez, a former paratrooper who was elected in 1998 and re-elected two years later, seemed to hint at further arrests, saying judges should not ``be afraid to issue arrest warrants against coup-plotters.''

Attorney General Isaias Rodriguez said Fernandez and Ortega were the only opposition leaders wanted for arrest, but ruling party lawmaker Luis Velasquez said that about 100 more people who supported the strike, ranging from labor bosses to news media executives, could be arrested.

``More than 100 are on the list to be captured,'' Velasquez said. The existence of such a list could not be immediately confirmed.

Ortega remained at large and pledged to ``continue the fight'' while in hiding.

``The only one who has a date with justice is the president,'' the labor leader told the local Globovision TV station by telephone.

Fernandez and Ortega face charges of treason, rebellion and instigating violence for their roles in orchestrating the strike, which continues in the vital oil industry.

Labor and business leaders warned of another nationwide strike in response to the arrest orders. The earlier work stoppage cost Venezuela an estimated $4 billion.

Chavez supporters gathered near the police headquarters, where Fernandez was being held, and a downtown plaza to celebrate the arrest.

``It's what had to be done. These opposition leaders tried to destroy the country; now they must be punished,'' said Tomas Ordonez, a 49-year-old taxi driver.

www.forbes.com Reuters, 02.21.03, 3:23 PM ET

CARACAS, Venezuela, Feb 21 (Reuters) - Venezuela's strike-hit oil production rose by over 100,000 barrels per day (bpd) to 1.515 million bpd on Friday, dissident workers of state oil firm Petroleos de Venezuela (PDVSA) said. The government, which has been struggling to restart the OPEC nation's oil sector after a strike by foes of President Hugo Chavez, says output is over 2 million bpd. On Thursday, the rebel PDVSA staff said output was around 1.4 million bpd. Venezuela had been pumping about 3.1 million bpd before the strike, which had wide support from PDVSA managers and executive, was started on Dec. 2. Chavez has since fired over 12,000 of the rebel oil staff, and vowed they will never be allowed to return. The dissident workers continue to hold anti-government rallies and say replacement staff hired to restart the industry will never restore oil production to pre-strike levels.

www.vheadline.com Posted: Friday, February 21, 2003 By: Roy S. Carson

Under heavily armed police escort, rebel Venezuelan Federation of Chambers of Commerce & Industry (Fedecamaras) president Carlos Fernandez has been taken from State Security Police (DISIP) cells to the Palace of Justice where he is scheduled to appear before the court later this afternoon.  National Guard (GN) riot squads have surrounded the court building against a possible attempt by rebel opposition forces to free the prisoner who faces charges, among others, of treason, incitement to rebellion.

Rebel Confederation of Trade Unions (CTV) leader Carlos Ortega has gone into hiding to avoid arrest for a similar list of crimes which also include incitement to assassinate President Hugo Chavez Frias.  Military Intelligence (DIM) sources say it is only a matter of time before Ortega will be captured but it is also admitted that he may already have fled the country to take up an offer of political asylum offered by the government of Spain.

Organization of American States (OAS) general secretary Cesar Gaviria has surprised accredited diplomats in Caracas by calling on Venezuelan government authorities to afford Fernandez and Ortega privileges "in accord with their highly-placed status in Venezuelan society" but Attorney General Isaias Rodriguez says both men will be treated just the same as any other common criminals and that other government saboteurs will be brought to book.

Opposition propagandists have been attempting to claim that Fernandez was unlawfully arrested when DISIP officers, acting on specific court orders, cornered him at a fashionable restaurant in Las Mercedes just after midnight Thursday.  There had been an exchange of gunfire before Fernandez' bodyguards were disarmed and the prisoner was taken to DISIP HQ in Caracas under close guard.

Today's 34th Control Court hearing will decide if Fernandez should be remanded into the custody of 6th National Prosecutor Luisa Ortega Diaz for 30 days pending formal charges.