www.kansascity.com Posted on Thu, Feb. 27, 2003 By JUAN FORERO The New York Times

CARACAS, Venezuela - Tankers are once again setting sail from Venezuela, loaded with crude oil bound for the United States.

Meanwhile, government planners busily try to rebuild and reorganize state-owned Petroleos de Venezuela, pondering how to function with 40 percent fewer workers.

Oil, the lifeblood of Venezuela's economy, is flowing again after a paralyzing two-month national strike. Production is now topping 2 million barrels a day, say officials of the $46 billion-a-year company. They predict that Venezuela's oil industry, with a leaner government-run company leading the way, will soon be back to pre-strike production.

"We are getting close to normal," said Enrique Salazar, a loading master on the Caribbean coast, peering from a control room as a tanker, the Morichal, took on 25,000 barrels an hour.

But oil analysts and economists say the government's rosy picture hides a painful truth about a 27-year-old company that was born when Venezuela nationalized oil production.

Petroleos de Venezuela has lost $4 billion in exports and nearly 16,000 workers, fired by the government for taking part in a walkout aimed at debilitating President Hugo Chavez's left-leaning government. That financial blow, and the loss of workers with 17 years of experience on average, could permanently hobble the company, keeping it from assuming its role as a leading world oil provider, analysts here and abroad say.

"It will not be the company it once was," said Mazhar al-Shereidah, an oil economist in Caracas who helped write oil regulations for the Chavez government. "For a country that depends on petroleum, now more than ever, the challenges are too great. You have to pray for Venezuela."

The dire predictions, if true, would indeed be disastrous for this country of 24 million, which depends on oil for half of government revenues and 80 percent of exports. It would also leave the United States -- which has counted on Venezuelan oil for decades -- without one of its most reliable suppliers as war with oil-rich Iraq promises to batter energy markets.

The obstacles in the aftermath of the strike, which ended in early February, are daunting. A lack of maintenance has caused sand to build up in the gelatinous deposits and caused the pressure to drop, making some fields worthless and threatening to cut production capacity by 300,000 or more barrels a day.

And perhaps most troubling is that no one knows what Chavez's government has in store, though it has promised a wholesale revamping of what was once the world's second-largest oil company.

Reports from international analysts are blistering. UBS Warburg predicts that oil's contribution to gross domestic product will fall 22 percent this year, with Venezuela facing "a fiscal crisis of major proportions." Fitch Ratings said Venezuela's "image as a reliable crude oil supplier has been undermined" and will he hard to recover.

Analysts say the lack of technical expertise and the company's financial straits mean that Petroleos de Venezuela will be unable, in the short term, to reach pre-strike production levels, when Venezuela was a top 10 producer and the world's fifth-largest oil exporter. Most recent production has been in fields that were easiest to restart, leading independent analysts to predict that Venezuela will, at best, produce 2.3 million barrels daily by the end of this year.

"We believe the company's role in Venezuela society has been permanently altered," Deutsche Bank recently reported. Assuming average daily production of 1.7 million barrels for the year, the bank estimated that oil revenues will reach only $14.1 billion, down nearly 50 percent from 2001.

The government is already preparing for the worst. The 2003 budget for the oil company was cut by $2.7 billion, to about $6 billion, while the income the government draws from oil is forecast by UBS Warburg to fall from $11.5 billion in 2002 to as little as $5 billion this year. The sharp drop will make it especially difficult to raise the $5 billion the company would have spent to keep production steady.

Ali Rodriguez, the former leftist guerrilla who is now president of Petroleos de Venezuela, does not gloss over the obstacles. But in an interview, Rodriguez said the doomsday predictions originate with dissident executives who hoped to undermine international confidence in the oil company to weaken Chavez.

He predicted that through sharp budget and personnel cuts, the company will reach 3.1 million barrels a day. And "with its resources," he said, "it is perfectly possible that it will even surpass that level."

Oil analysts warn that the company will be debilitated for years from the loss of experienced workers. Those employees -- executives, office workers, engineers and highly trained technicians -- joined the walkout and, in some cases, damaged computers and software and stole files to hinder reactivation efforts.

Chavez, who has referred to the employees as traitors and fascists, has promised that they won't be rehired.

But already, oil analysts say, the shortage of experienced workers is being felt in every corner of the company. In the patents and technology department, which develops technology for exploration and refining, 800 were fired. The department that trains executives has lost hundreds, as has the department that contracts with oil purchasers.

"Even if you replace the bodies, you don't replace institutional memories," said Larry Goldstein, president of the Petroleum Industry Research Foundation, an industry-supported analysis group in New York. "It's a hidden loss. You can't touch it or taste it, but it's there."

www.news24.com 27/02/2003 09:39  - (SA)  

Singapore - Oil prices continued their upswing in Asian trading on Thursday on the strong likelihood of an Iraq war, blizzards and low inventories in the United States and tensions on the Korean peninsula.

New York light sweet crude for April delivery was trading around US$38.30 in after hours trade, US60c above its close.

"The day to day volatility is going to continue before any military action takes place between the United States and Iraq," said Victor Shum, senior partner of international energy consultants Purvin and Gertz Inc.

Shum said he believed it would be a short war after which the war price premium of $5 to $8 would disappear quickly and prices stabilise.

"But you never know what is going to happen on one day or another," he said, referring to outside factors such as North Korea testing missiles.

The blizzards and low inventories in the United States as well as strikes by oil workers in Venezuela and Nigeria were other factors hitting the market, he said.

Traders said Russian and West African oil producers were moving crude into Asia, especially Japan and South Korea, where inventories remained at comfortable levels.

Saudi Arabia was also seen chartering tankers for increased crude exports, according to SG Economic Research.

With more crude being made available on fears of supply disruption during the war, traders were already discounting a major price correction after a military conflict in the Middle East. - Sapa-AFP

www.casperstartribune.net By DUSTIN BLEIZEFFER Star-Tribune energy reporter Thursday, February 27, 2003

GILLETTE -- Natural gas producers are enjoying the high side of the ebb-and-tide pricing market now nearing the $4.50 per thousand cubic feet (mcf) of gas mark at Wyoming trading hubs, according to Enerfax Daily. Cold winter weather in the eastern portion of the U.S. has helped boost prices for all producing areas, including the Rockies -- an area that was slammed this past summer with prices that dipped to $1 per mcf and below. Such seasonal changes are expected in the natural gas pricing market. But in a telephone conference Monday about his company's pending merger with Ocean Energy, Inc., Devon Energy Corp. chairman, president and CEO Larry Nichols proclaimed natural gas prices could remain on the high side for a long time to come. "We have moved into a new era of gas prices," Nichols said. Speaking of natural gas pricing at Louisiana's Henry Hub, Nichols added, "The days of trading at $2 (per mcf) or less are gone forever. Because of the way storage is being depleted, we are going to see some of the highest gas prices in history." Stu Wagner, a natural gas market analyst with Petrie Parkman & Co. in Denver, said he agrees natural gas prices are not likely to dip to this past summer's lows, and there's many reasons to believe prices will remain strong for the rest of 2003. "We'd agree that the era of $2.50 gas is over. That is, at Henry Hub," Wagner said, noting that the Rockies still trails the rest of the nation's wholesale natural gas prices by about $2 per mcf. "We've had a very strong withdrawal from storage as a result of cold weather, and we've had a low rig count for the past 18 months, and we're not replacing production," Wagner said. Cold weather is depleting gas storage -- now nearly 43 percent below one year ago, according to the Energy Information Administration. However, there are other forces at play. Wagner said the price of crude oil has been pushed to the mid-$30 per barrel due to the possibility of war in Iraq and the oil strike in Venezuela. Natural gas pricing follows crude pricing, and both have been on the rise. "If there is war in Iraq and it's settled relatively quickly without a lot of interruption to crude oil supplies, we think you'll see crude oil drop down to the mid- to low $20s per barrel. And we'd expect some sympathy reaction from natural gas," Wagner said. Nichols said Devon Energy's North American operations are focused mostly on natural gas, and that focus will remain given the future pricing climate. "Prices will knock out some demand, but it can't knock out all the demand," Nichols said in the telephone conference. "This year is the first time since 1986 that Canadian imports actually fell. ... We think it's going to be robust for natural gas all year long."

oklahoma.theinsiders.com By Joe Wallace Date: Feb 27, 2003

Villarroel scores a career-high 31 points against in the Sooners' 74-69 win over Missouri

NORMAN, Okla. - Someone didn't give Oklahoma guard Maria Villarroel the memo it was senior night.

Villarroel, a junior from Margarita, Venezuela, stole the show and scored a career-high 31 points as Oklahoma claimed sole possession of fifth place in the Big 12 after their 74-69 win over Missouri Wednesday night in Norman.

"It's fun to play on senior night. I told Maria to have a career night for me and she did," said senior Theresa Schuknecht.

Missouri came out smoking in the first half, hitting 10 three-pointers en route to taking a 42-38 halftime lead, but the Sooners hit 16 free throws in the second half and outscored the Tigers 36-27.

"It is definitely a huge win," said Oklahoma Head Coach Sherri Coale, whose Sooenrs improve to 8-6 in Big 12 play while Missouri falls to 7-7. "Probably my favorite part about this is the fact we never faltered during the first half when they could do no wrong."

Schuknecht, one of two senior starters for the Sooners, didn't have a bad night herself. The transfer from Arizona State grabbed 15 rebounds, scored 11 points and blocked five shots in her final home game as a Sooner.

Kate Scott, a little-used senior from Overland Park, Kan., started and played just one minute, and Stephanie Simon were also honored during senior night festivities. Simon, a forward from Clinton, had her senior season end last month when she sufferd an injury to her right knee.

"Every time a senior class graduates they take a big chunk of your identity with them," said Coale. "Sometimes seniors go and they take a bunch of points, assists and rebounds and sometimes they don't. They're always felt. They always take something with them when they go. These are three very, very special kids. Sometimes stars need a little glue in between them and these guys have been it."

Oklahoma will finish the regular season on the road with games at Oklahoma State (Saturday) and Texas (next Wednesday).

The Sooners are now 17-10 overall this season.

www.iowastatedaily.com By James McKenzie Daily Staff Writer February 27, 2003

The skyrocketing prices of gasoline are having a muted effect on local transportation.

Gas prices are nearing $2 per gallon in parts of the nation. However, Iowans have seen significantly lower prices.

The rising gas prices are connected to a possible war with Iraq, which could restrict oil shipments from there. Iraq holds the world's second largest proven oil reserves, second only to Saudi Arabia.

Some filling stations in Ames are finding ways to reduce consumer costs.

Bill Wheelock, manager of Wheelock Sinclair, 105 E. Lincoln Way, keeps prices low by using non-Middle Eastern petroleum.

As of Wednesday, Wheelock's mid-grade (ethanol-enriched) gasoline was $1.56 per gallon while local Kum & Go stations were charging $1.69 per gallon for the same grade of gasoline.

Wheelock said Sinclair's refineries are in Wyoming, which means Sinclair stations escape some of the costs that come along with Middle Eastern oil. This also means Wheelock's gas is up to 13 cents per gallon cheaper than some of his competitors.

Another company using non-Middle Eastern products is Citgo. Citgo Petroleum gets its petrol from its parent company, Petroleos de Venezuela, according to Citgo's Web site.

Venezuelan petroleum is keeping Citgo's prices low. On Wednesday, prices were $1.57 per gallon for mid-grade gasoline.

Another factor is Iowa tax incentives on ethanol-blended gasoline. Ethanol, a fuel additive that can be made from corn byproducts, helps support Iowa farmers, burns cleaner and shaves a few cents off prices, according to the State of Iowa Web site.

Sinclair and Citgo's ethanol prices are 2 cents lower than standard gas, but places like Kum & Go and BP range from 3 to 5 cents lower than standard-grade gas.

Even with prices at near-record highs, Wheelock said business remains constant.

"People might complain about the prices, but they keep driving," he said.

All but two of CyRide's vehicles use diesel fuel, but the system is still feeling the effects of gas rate increases, said Bob Bourne, director of CyRide.

"Fuel costs are up 25 percent since last October," he said. "A bus usually uses about two and a half gallons [of fuel] per hour... so costs are up about 60 cents an hour."

Bourne said ridership has increased as much as 35 percent but cannot be directly attributed to the rise in gasoline prices. Other factors increasing ridership include making all routes free for students and winter weather, he said.

An overall effect is yet to be seen, Bourne said. CyRide ran under budget during fall semester and, therefore, had a surplus of funds coming into the spring semester, he said.

This gave CyRide a cushion for going over budget on fuel in the spring.

The cushion may not last if prices continue to rise, Bourne said.

"We haven't seen a budgetary impact yet," he said.

-- CNN contributed to this story.