<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, April 03, 2003 By: Patrick J. O'Donoghue

Former Pequiven manager and Gente de Petroleo leader, Edgardo Paredes has sent a strong message to the government-opposition negotiating team to recognize his organization's responsibility in the political situation and its role in "helping to restore democracy." 

Speaking at a press conference in front of Petroleos de Venezuela (PDVSA)  HQ in Chuao and dismissed colleagues, Paredes complains that reinstatement of dismissed oil sector workers must remain an integral part of negotiations ... "a point of honor in the negotiations." 

Paredes, famous for his April 11 announcement to sever ties with the Organization of Petroleum Producing Countries (OPEC), is said to have called the press conference on learning that PDVSA  reinstatements is one of the issues that has been relegated from the negotiations agenda. 

Executive Vice President Jose Vicente Rangel  has ruled out any government amnesty for dismissed PDVSA executives and managers, who, he claims, abandoned their posts to join the opposition-led national stoppage. "The matter of reinstatement is the competence of PDVSA itself and the Justice system and not the negotiating team."

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, April 03, 2003 By: VenAmCham

The government proposal suggests the adoption of a system whereby Venezuela will provide oil in exchange for finished products, infrastructure development projects, and other goods acquired from abroad aiming to strengthen Venezuela's trade and to develop its infrastructure.

Energy & Mines Minister Rafael Ramirez says "these are important investment projects in which he foreign companies will do the work and provide their investment capital, and Venezuela will pay with oil."

During his "Alo Presidente" program last Sunday, President Chavez Frias had proposed exchanging oil and petroleum products for the development of Venezuela's infrastructure and claimed that several countries ... among them Brazil and Italy ... were willing to accept oil and other products in exchange for building prisons, schools, and houses in Venezuela.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, April 03, 2003 By: VenAmCham

Venezuelan Energy Minister Rafael Ramirez  says foreign oil companies could invest as much as a billion dollars to develop new oil fields in Venezuela. ExxonMobil, Royal Dutch Shell, Total Fina Elf, and Statoil are among companies operating in Venezuela that may develop the Tomoporo field with an estimated 1.5 billion barrels of light and medium crude, according to state news agency Venpres.

Another two fields with an estimated billion barrels of oil have also been added to the development plans, Ramirez says ... the Tomoporo field's discovery was announced last week by Petroleos de Venezuela (PDVSA) director Luis Marin.

President Hugo Chavez has fired more than 16,000 of the PDVSA's 40,000 employees after they staged a strike demanding his resignation. At one time Venezuela's oil output fell to less than 200,000 barrels per day, from a 3 million barrel per day average last November. Current production volume is thought to be 2.4-2.8 million barrel per day with exports exceeding 2 million barrels per day.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Thursday, April 03, 2003 By: VenAmCham

Less than a week after Petroleos de Venezuela (PDVSA) president Ali Rodriguez Araque said that dismissals from the State-owned oil company had come to an end, a new list has been published announcing the dismissal of yet another 828 oil workers.

Signed by Rodriguez himself, the list raises the total of fired employees to 17,871 ... 47% of the labor force at PDVSA as per December 31, 2002, according to figures published in the Gaceta Oficial (Official Gazette).

<a href=ogj.pennnet.com>Oil&Gas Journal Sam Fletcher Senior Writer

HOUSTON, Apr. 3 -- Energy futures prices continued to plunge Wednesday, as reports of increased US oil inventories triggered additional selling among optimistic traders.

The US Department of Energy reported US crude inventories "built substantially," up 6.8 million bbl to 280.7 million bbl during the week ended Mar. 28, with higher imports "more than offsetting" a 400,000 b/d increase in refinery runs. "Although the (American Petroleum Institute) reported a more substantial build of 9 million bbl, the two reports essentially resulted in the same level of absolute stocks at 281millon bbl," said Matthew Warburton with UBS Warburg LLC, New York.

Oil imports Warburton reported US oil imports surged to a record 10.36 million b/d during the last week of March, primarily due to the arrival of cargoes from Saudi Arabia. But he and other analysts noted that increased shipments of heavy, sour oil from Venezuela and Saudi Arabia can't offset interrupted supplies of light, sweet Nigerian crude.

Moreover, Paul Horsnell, analyst for J.P. Morgan Securities Inc., London, noted, "Current arrivals of crude represent a time of loading when Nigeria and Iraq were at full (export) capacity. Given that, it is by no means clear that imports can be maintained above 10 million b/d throughout (the second quarter), once the cushion of extra oil in the supply chain over the next few weeks begins to abate."

Horsnell said, "More Saudi oil would be a poor quality substitute for Nigerian supplies, especially given the current imperative for refineries to produce higher gasoline yields."

Warburton agreed, "Prolonged reduction in Nigerian export volumes could become increasingly critical to summer production given its gasoline-rich composition." He noted that, in the latest reported period, "Gasoline inventories increased by 1.7 million bbl, driven primarily by high imports and subdued demand, but most of the increase was in other finished gasoline and blending components, offsetting a modest further fall in RFG (reformulated gasoline) inventories."

"The stubbornness of oil product deficits is of some concern," said Horsnell. "For the first time since the inventory deficit first opened up 9 months ago, more than half of that deficit is in oil products."

Therefore, he said, "It will not matter how fast crude oil piles up if the system is having difficulty refining it fast enough. We still believe that the US market will have difficulty in avoiding a significant gasoline price spike this summer, as the task of playing catch up with inventory cover is one that the US refining system has recently proven extremely poor at achieving."

Meanwhile, Horsnell said, "Some traders seem to believe that $20/bbl is the inevitable and immediate result of an outcome in Iraq, and many are still expecting a magic spigot to sharply and swiftly increase Iraqi exports. Our position remains that the fundamentals do not support prices in the low $20s; that significant Iraqi exports are unlikely this quarter and in some doubt for next quarter; and that it would be a supreme achievement to merely stabilize Iraqi production over a 2-year period."

Energy prices The May contract for benchmark US sweet, light crudes plummeted by $1.22 to $28.56/bbl Wednesday on the New York Mercantile Exchange, while the June position fell $1.02 to $27.21/bbl. Unleaded gasoline for May delivery plunged 5.03¢ to 86.39¢/gal. Heating oil for the same month dropped 2.23¢ to 71.86¢/gal.

The May natural gas contract lost 6¢ to $5.07/Mcf on NYMEX. "Limited short-covering pushed the market above key $5(/Mcf) support. Limited short-covering is the only way the market will strengthen for now," gas market analysts said Thursday at Enerfax Daily. "The market still faces near record-low storage inventories."

The US Energy Information Administration reported Thursday a 37 bcf injection of natural gas into US underground storage last week. That compares with an injection of 7 bcf the previous week and the withdrawal of 61 bcf during the same period last year. At the end of the traditional withdrawal season, US storage stands at 680 bcf. That's 820 bcf less than at the same time a year ago, and 506 bcf below the 5-year average.

A recent study by C.H. Guernsey & Co., Oklahoma City, concluded that more than 2.2 tcf of natural gas must be injected into underground storage from now through October to get even close to a 3 tcf "comfort level" by Nov. 1. Net gas injections through the summer of 2002 totaled less than 1.7 tcf.

Such demand is certain to impact US natural gas prices "throughout the summer and into next winter," said Guernsey officials.

"We believe that natural gas prices will regain momentum with the onset of summer as it becomes apparent. . .that significant demand needs to be 'backed out'. . .to attain a reasonable storage level entering next winter," said Robert S. Morris, energy analyst for Banc of America Securities LLC, New York, in a separate report Wednesday. He said an average gas price of $5-5.50/Mcf—"more likely higher than lower" —will be necessary to back out 5 bcfd of gas demand "in order for storage to just reach (2.75 tcf) at the beginning of November."

In London, the May contract for North Sea Brent oil fell $1.17 to $25.21/bbl on the International Petroleum Exchange. Brokers said prices are likely to stabilize around $25/bbl in that market. The May natural gas contract lost 8.8¢ to the equivalent of $2.57/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes dropped $1.04 to $25.76/bbl. With oil prices already near the mid-point of OPEC's targeted $22-28/bbl price range, some analysts doubt that members of the cartel will be as willing to increase production to offset losses from Iraq and Nigeria.

Contact Sam Fletcher at samf@ogjonline.com