Pravda By Hernan Etchaleco 04/24/2003 10:30

The summit comes at a moment when bilateral relations between both South American nations are tense. Border security and trade issues were discussed in Puerto Ordaz, Southern Venezuela. After Colombia's President Alvaro Uribe Velez sworn in on August 2002, the relation with his bordering counterpart, Hugo Chavez Frias, gradually deteriorated. Colombia has repeatedly accused Caracas of sheltering groups to find cover in Venezuelan territory after crossing their common border. Venezuela, in turn, protested for the incursion of Colombian paramilitaries within its territory and recently ordered air strikes against those groups.  

Also, a trading dispute involving Colombian and Venezuelan corporations has played its part to tense bilateral connections. According to official reports, a group of businessmen in Caracas owe Colombian companies around 300 million dollars and Chavez promised a solution in the short term.

All in all, it looks like not only official stuff separates both leaders, but also ideological positions over internal and foreign affairs. While Uribe vows for closer ties with Washington, Chavez stands for a more independent line in foreign affairs, providing Cuba with economical aid and approaching the Mercosur, block led by Brazil and Argentina.

Uribe has repeatedly pledged for US military aid to fight rebels and even asked for a large-scale US disembark in Colombia "like the one in Iraq". Naturally, Venezuela's authorities are very reluctant to see Rumsfeld's forces fighting 400 kilometers away from Caracas, as Chavez believes Washington was behind the frustrated coup against his administration on April 2002.

On the other hand, communist support to Caracas' government dislike of the hard-line policy to fight guerrillas adopted by Uribe. The Communist Party of Venezuela supports Chavez, and some of its high members officially collaborate with Venezuela's government as advisors. This left wing force supports the actions of the Revolutionary Armed Forces of Colombia v FARC - and other marxist rebel groups, as they were originally organized by Colombian communists.

Despite allegations, Chavez said he's committed to improving relations with Colombia. News agencies in Caracas report that Chavez denies his government has ever aided Colombia's leftist insurgent groups. He has said groups in both countries are trying to ruin the neighbors' relationship, but he said he's optimistic that Wednesday's meeting would be a success despite his adversaries' efforts to "sabotage" it.

In the airport of Macagua, Uribe and Chavez addressed formal statements in which pledged for full integration between both countries. "This welcome comes from the bottom of my soul", said Chavez in his usual flowered way of speaking. "I trust in our capabilities to build, in this century, the full and true integration of our peoples, economies and potentials".

Both leaders also discussed how to improve the weakened trading between Venezuela and Colombia. According to official statistics, trade between the two nations topped $2 billion over the last two years. However, According to estimates from the Colombian Venezuelan Chamber of Commerce and Integration, bilateral trade could fall by as much as 60 percent this year due to restrictions to foreign trading recently implemented by Chavez to block flight of capital.

The summit was the second that Chavez and Uribe have held in less than six months. The previous meeting took place on November 14 in Colombia.

<a href=quote.bloomberg.com>Bloomberg News Feature By Mark Jaffe

Denver, April 24 (Bloomberg) -- The Valero Energy Corp. refinery outside Denver, a jungle gym of white and silver pipes on the edge of the Colorado prairie, has been converting oil to fuel since 1937.

It's still profitable. The 27,000 barrels of oil it processes each day provide 15 percent of Colorado's gasoline and diesel fuel.

That may not be good enough. Valero, the third-largest U.S. refiner, must decide whether to spend millions of dollars to retool the plant to make cleaner fuel beginning in 2004, or shut it down.

ConocoPhillips, Exxon Mobil Corp., BP Plc and other refiners across the U.S. face the same choice. The industry estimates it must spend $16 billion to retrofit plants to meet the costliest federal clean-fuel rules since lead was banned from gasoline in 1986. Only 13 of 152 U.S. refineries now comply.

It's going to cause supply to be in shortfall, I kid you not,'' said William Greehey, Valero's chief executive, in an interview. The Denver plant will be closed unless Valero can organize a joint venture there: It does not justify those investments on a stand-alone basis.''

One Illinois plant has already been shut and five other refineries including the Denver plant are considered at risk of being closed because they are too old or too small to be profitable given the cost of retooling. The resulting consolidation of the 16.6 billion-barrel-a-day U.S. industry will reduce already-stretched capacity, company executives and analysts said. It may also cause gas prices to jump.

Less Capacity, Higher Prices

U.S. refinery capacity will shrink between 5 percent and 10 percent under the new rules, according to a study by Friedman Billings Ramsey & Co., a brokerage and investment bank in Arlington, Virginia.

``Marginal players are going to drop out,'' said Jacques Rousseau, an analyst at Friedman Billings Ramsey. Other companies will need to form alliances to cut costs, he said.

New production methods needed to produce the cleaner fuels will also cut U.S. refinery capacity. The new regulations, issued last year by the Environmental Protection Agency under provisions of the 1970 Clean Air Act, require refiners to begin reducing levels of sulfur in gasoline in 2004. By 2006, refiners must remove virtually all sulfur, under the EPA rules.

The hydrogen technology used to remove sulfur reduces the quantity of gasoline produced, and the octane as well, said Tom Nimbley, president of refining at ConocoPhillips, the biggest U.S. refiner.

The tighter capacity will make the gasoline market vulnerable to price jumps, executives and analysts said.

U.S. refineries ran at an average 91 percent capacity in 2001, according to the U.S. Department of Energy. Demand for gasoline is growing about 2 percent a year, while capacity has been growing about 1.5 percent annually, said the National Petrochemical and Refiners Association, a trade group.

No New Refineries

The system is incredibly tight,'' said Jon Kyle Cartwright, an analyst at Raymond James & Associates in St. Petersburg, Florida. A new refinery hasn't been built in the U.S. in decades, so most of the time the industry is running at more than 90 percent capacity.''

``Any disruption can lead to a jump in prices,'' he said.

Regular gasoline rose to a record national average price of $1.72 a gallon on March 18, the day before allied soldiers entered Iraq. Some refiners lost oil supplies due to a strike in Venezuela and while others were producing heating fuel.

Fewer companies and less production capacity may translate into wider profit margins for the survivors and ``lead to some good times for the refining industry,'' Jack Drosdick, chief executive of Sunoco Inc., the seventh-largest U.S. refiner, said at a conference for analysts this month.

Debate Over Costs

The price for staying in the industry will be steep. The National Petrochemical and Refiners Association estimates the new rules will cost the industry $16 billion. The EPA put the cost at $5.2 billion.

``Our experience is that industry always overestimates the cost of regulations,'' said Margo Oge, director of the EPA's Office of Transportation and Air Quality.

Refiners counter that the EPA's estimates are too low. The five largest refiners alone -- ConocoPhillips, Exxon Mobil, Valero, BP and Marathon Ashland Petroleum Corp. LLC -- are planning to spend about $3.4 billion, according to federal filings and company estimates.

The industry total will be higher. In 2002, there were 48 companies operating 152 U.S. refineries, converting crude oil into gasoline, diesel fuel, heating oil and butane for cigarette lighters, according to the U.S. Department of Energy.

'About the Worst Business'

The added costs confront an industry that has not been very profitable in the last decade. ``Until three years ago refining has been just about the worst business in the country,'' said Cartwright of Raymond James.

Sunoco, for example, has had an average annual profit margin of 2.3 percent for the past five years and Valero a margin of 1.1 percent, according to Bloomberg data. Shares in the Standard and Poor's Supercomposite Oil & Gas Refining and Marketing Index fell 2.4 percent over the past five years. The index, which includes Valero, Sunoco and five other companies, has risen 5.4 percent this year.

Refiners say they aren't sure if or how they'll be able to pass along the cost of those investments. The EPA estimates the cost at 2 cents a gallon. The refiners' association says it will be 5 cents, including annualized amortization of the investment in new equipment plus higher operating costs.

These are going to be difficult investments to recoup,'' said Joel Maness, Sunoco vice president for refining. We aren't adding capacity. We aren't making a new product.''

No Free Cash Flow

Because of that, most companies said, they will avoid borrowing to finance the cost retrofitting their plants. They will spend cash instead, as the industry traditionally does to pay for upgrading and maintenance work.

``We would prefer to issue debt only when we increase the productive capacity of our asset base,'' said Thomas Hofmann, Sunoco chief financial officer.

``There isn't going to be any free cash flow for years,'' said Geoffrey Rosenberger, who helps manage the $1.9 billion in assets at Clover Capital Management. Clover held 315,215 shares of Valero, as of December 2002.

Sunoco estimates that it will cost the company $300 million to $400 million to meet the new rules at its four refineries, Maness said.

Valero says it will spend $1 billion over the next five years to retool 11 refineries for clean fuels.

'A Lot of Money'

ConocoPhillips estimates that a third of its refinery capital spending over the next two years, about $475 million a year, will go to meeting clean fuel standards, said Nimbley, the president of refining.

BP, Europe's second-biggest oil company and the fourth- largest U.S. refiner, is spending $300 million this year to upgrade refineries.

There's no question it's a lot of money,'' John Manzoni, BP's head of refining and marketing, said in an interview. There is also no question it has to be done.''

The clean-fuel rules will help reduce auto tailpipe pollution, a key source of smog, by 77 percent, according to the EPA.

$25 Billion in Benefits

The cleaner air will prevent 4,300 premature deaths, 173,000 cases of respiratory illness and 260,000 asthma attacks among children, producing $25 billion in public health and environmental benefits, the EPA estimates.

Over a three-year phase-in, starting in 2004, sulfur levels in gasoline must be cut to 30 parts per million from 300 parts per million and by 2010 diesel fuel sulfur must drop to 15 parts per million from 500.

Since 1970 air pollution has been cut by 30 percent, the EPA says, even as the number of miles logged by American drivers has almost tripled, to 2.8 trillion in 2001.

``We've taken a huge chunk out of air pollution, but now we have to work hard just to stay in place,'' said Oge.

There is a price to stay in place.

In February 2002, Premcor, a refiner based in Old Greenwich, Connecticut, closed its plant in Hartford, Illinois. Premcor Chief Executive Thomas O'Malley said the company had ``been unable to justify the significant investment that would be necessary to remain in operation.'' ConocoPhillips agreed Wednesday to pay Premcor $40 million for processing units and other assets at the closed plant.

Refineries 'at Risk'

A Friedman Billings study listed five refineries with a total capacity of 317,800 barrels a day ``at risk'' of being closed.

These included Valero's Denver refinery; the Marathon Ashland refinery in Canton, Ohio; Farmland Industries' Coffeyville, Kansas, refinery; and ChevronTexaco's refinery in El Paso, Texas.

Marathon Ashland, the fifth-largest U.S. refiner, has no plans to close any refineries, said company spokesman Chuck Rice. ``We are investing $800 million in clean fuels over the next six years,'' he said.

As for ChevronTexaco's El Paso refinery, company spokeswoman Nicole Hodgson said, ``We are still evaluating our options.'' ChevronTexaco is spending $150 million to upgrade its Pascagoula, Mississippi, refinery to produce clean fuels.

The industry is facing big changes,'' said Edward Murphy, a senior manager at the industry trade group the American Petroleum Institute. I don't think many people realize how big.'' Last Updated: April 24, 2003 02:00 EDT

Posted on Thu, Apr. 24, 2003 VANESSA ARRINGTON kansascity.com-Associated Press

BOGOTA, Colombia -Rebels burst into a hospital and shot dead two soldiers who were seeking treatment, the latest in a string of attacks in Colombia's lawless Arauca state.

The Colombian army accused the Revolutionary Armed Forces of Colombia, or FARC, of committing a war crime with the attack Tuesday in the village of Fortul.

The gunmen pushed their way past medical personnel and shot Cpl. Hernan Villa Garcia and Pvt. Carlos Correa Galeano, who were at the hospital for dental care. Another soldier was severely wounded.

President Alvaro Uribe declared three of Arauca's biggest towns - not including Fortul - special militarized zones under emergency powers he assumed after taking office last August. Those powers expire the first week of in May, and with them will go Arauca military officials' right to round up terrorist suspects at will and monitor telephone conversations.

The three main towns - Arauca, Saravena and Arauquita - have continued to be bloodied by attacks, and much of the rest of Arauca state remains firmly controlled by rebels, who have been waging a four-decade war against the Colombian state.

The FARC, a smaller leftist rebel group and a right-wing militia are fighting for control of Arauca, situated along Colombia's eastern border with Venezuela.

Journalists working in Arauca state were forced to flee to Bogota, the capital, earlier this month after receiving death threats from the illegal armed groups. Two of the journalists have returned to Arauca, but more than a dozen are waiting for more protection from the government.

On Wednesday, the Colombian Supreme Court approved the extradition Wednesday of a rebel wanted in the United States for the 1999 murders of three pro-Indian activists in Arauca state.

When his extradition order is signed by the president, Nelson Vargas Rueda will be the first rebel sent by Colombia to face charges in the United States.

FARC rebels kidnapped Americans Terence Freitas, Ingrid Washinawatok and Lahee'Enae Gay in February 1999 as they worked with Indians in northeastern Colombia, the indictment says. Days later, the kidnappers shot the victims. Their bodies were found across the border in Venezuela.

<a href=www.voanews.com>VOA News 24 Apr 2003, 04:43 UTC

OPEC oil ministers are to meet in Vienna Thursday to discuss ways to keep oil prices within the group's desired range. The 11-nation cartel's announced aim is to stabilize prices at around $25 per barrel.

Analysts say the cartel is considering a cut in production to 24.5 million barrels a day.

Opec ministers decided in January to produce about two-million barrels more than their agreed quotas to keep prices down during a strike in Venezuela and the threat of war in Iraq. But prices have stabilized since the fall of Baghdad and OPEC is concerned about keeping them in the middle of its $22-to-$28 a barrel target range.

Another problem facing OPEC is how to reintegrate Iraq without destabilizing the market. It is unclear what role Iraq will take in the cartel. Iraq, an OPEC founding member, has been excluded from the cartel's quota export system the past 11 years because of U.N. imposed sanctions.

The OPEC meeting comes as U.S. military officials said Wednesday that plans to restart pumping in Iraq's southern oil fields was ahead of schedule.

Houston Chronicle

ConocoPhillips, the largest U.S. oil refiner, said Wednesday that shipments from Venezuela haven't returned to normal after a December strike disrupted exports. But Venezuela has said its oil exports are normal.

The company said shipments of a grade called Merey are still low. ConocoPhillips wouldn't say whether a second grade it imports is also below normal.

"We will receive 13 shipments of Merey oil May through June," said Linsi Crain, a spokeswoman for ConocoPhillips in Houston. "We normally receive nine shipments a month."

State oil company Petroleos de Venezuela said it began honoring contracts for oil shipments from its eastern region on Feb. 25 and was able to meet all contracts on March 5.