ogj.pennnet.com Sam Fletcher Senior Writer

HOUSTON, Feb. 3 -- Energy futures prices were mixed Friday amid signs of increased oil production in Venezuela and possible postponement of military action against Iraq.

In a radio broadcast marking his fourth anniversary in office, Venezuelan President Hugo Chávez claimed Sunday that Venezuela is now producing 1.8 million b/d of oil and 1 bcfd of natural gas. He also announced that 5,000 managers and technicians have been fired from Petroleos de Venezuela SA (PDVSA), the national oil company, up from 3,000 previously.

Conflicting reports "There are conflicting reports as to actual production levels out of the country, but Venezuela still appears to be producing 1.7-2.2 million b/d below its capacity," said Tyler Dann, a Houston-based analyst with Banc of America Securities LLC, in a report issued last week. "Some industry observers have gone as far as to estimate that 400,000 b/d of (Venezuela's) production capacity has been eliminated," he added.

"Without a comprehensive resolution of the strike (preferably with Chávez out of power), refinery start ups and field rehabilitation work will likely be difficult to comprehensively execute," said Dann. "Future capacity rehabilitation (and) growth will likely be a function of western company involvement; our argument would be that, with Chávez still in power, this would be a tough sell to those companies."

Meanwhile, the Caracas-based online news service Petroleumworld.com, published on the internet, reported Monday that 5 million Venezuelans lined up Sunday to sign petitions to remove Chávez from office. Opposition leaders also said they were scaling back the 63-day general strike, with nonoil sectors of business returning to work Monday. They said they took that action in response to international requests and to demonstrate their willingness to negotiate a means of removing Chávez.

Energy prices The March contract for benchmark US light, sweet crudes lost 34¢ to $33.51/bbl Friday on the New York Mercantile Exchange, while the April position was down 22¢ to $32.74/bbl. The expiring February contract for heating oil plunged 2.17¢ to 95.88/gal. Unleaded gasoline for the same month dropped 1.13¢ to 97.56¢/gal.

However, the March natural gas contract inched up 2.2¢ to $5.61/Mcf on NYMEX "in a day of choppy trades and short covering ahead of the weekend," said analysts at Enerfax Daily.

"The market is still being driven by the weather and will probably remain somewhat volatile on conflicting mid-range forecasts (for colder weather through mid-February)," they said. "The concern is whether or not enough gas can be put in the ground over the summer. Inventories of natural gas storage have been drawn down substantially during the past month as frigid weather covered high-consumption areas in the Northeast. Last Thursday, the Energy Information Administration reported a 247 bcf withdrawal from storage—the third largest on record. The draw brought inventories down to 1.729 tcf, compared (with) a 5-year average of 1.919 tcf. However, a flat natural gas production profile and rising demand many predicting a $4.50(/Mcf) average price for 2003."

In London, the March contract for North Sea Brent oil lost 11¢ to $31.10/bbl on the International Petroleum Exchange. But the March natural gas contract gained 1.7¢ to the equivalent $2.81/Mcf on IPE.

The average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes gained 13¢ to $30.71/bbl Friday.

For the full week, however, the OPEC basket price averaged $30.29/bbl, down 52¢ from the previous week. So far this year, the OPEC basket price has averaged $30.34/bbl, compared with price averages of $24.36/bbl for all of 2002 and $23.12/bbl for 2001.

Contact Sam Fletcher at samf@ogjonline.com

www.forbes.com Reuters, 02.03.03, 12:45 PM ET By Pascal Fletcher CARACAS, Venezuela (Reuters) - Mild-mannered, bespectacled and wearing a sober business suit, Luis Pacheco seems an unlikely "terrorist." The former Planning Director of Venezuela's strike-hit oil giant PDVSA is one of more than 5,000 employees summarily fired by President Hugo Chavez for staging a nine-week walkout in the world's No. 5 oil exporter. Since the strike began last Dec. 2, gripping Venezuela's oil industry, it has triggered an economic emergency for Chavez. The firebrand left-wing president is now noisily demanding trial and jail terms for the PDVSA strikers he vilifies daily as "terrorists," "saboteurs" and "subversives." After 21 years working for state-owned Petroleos de Venezuela (PDVSA) and one of the biggest oil companies in the world, this torrent of abuse is hard to swallow for Pacheco and his colleagues, whose strike aims to force Chavez to hold early elections. "We look in the mirror ... and I think we all have clear consciences," Pacheco told Reuters in an interview. "We haven't carried out sabotage operations, we're not terrorists, we're not on television insulting everyone, we've tried to carry this through with the same dignity with which we've lived the rest of our lives," he added. Already the target of a government campaign to seek revenge against the strikers, Pacheco and other PDVSA strikers now face the prospect of continuing the strike alone, after opposition leaders said Sunday they were lifting the stoppage in non-oil sectors. Outside of the oil sector, support for the strike had already crumbled as shops, businesses and restaurants reopened to avert the threat of bankruptcy after sacrificing Christmas sales. But there was no turning back for the PDVSA strikers, who have vowed to stick it out until Chavez agrees to call elections. "I can't say that I'm not worried about us all ending up as scapegoats," said Pacheco, who was informed of his firing by an official PDVSA advertisement published in newspapers. Opposition leaders have demanded that the sacked PDVSA employees be reinstated as part of any agreement.

"NO AMNESTY" But Chavez, a former paratrooper who survived a coup attempt in April backed by many of the current PDVSA dissidents, has repeatedly ruled out an amnesty and ordered a legal offensive against the oil strikers he blames for wrecking the economy. "PDVSA has got to carry on not just firing (the strikers) but also taking them to court ... and taking away their pensions," Chavez said on Sunday. Six years before winning a 1998 election, he himself staged a botched 1992 coup that landed him in jail for two years, an event that also launched his political career. "We can't show weakness," the outspoken populist leader said. Since the strike began nine weeks ago, he has taken to calling himself "Commander Oil," and now gives regular reports on official levels of production, refining and export operations. Chavez also insists he has defeated the strike. Underpinning the president's confidence are signs that oil output and exports are steadily creeping back up after the government used troops and personnel loyal to the government to restart wells, ports and refineries. The president said Sunday that production was fast approaching two million barrels per day (bpd), around two thirds of pre-strike levels. The PDVSA strikers put output at 1.2 million bpd, but they concede that it is on the rise. PDVSA President Ali Rodriguez, himself a former communist guerrilla, has said the strike gave the government the chance to regain control of the oil company, purge it of "unpatriotic" employees and turn it into a vehicle for state revenue collection as a pillar of Chavez's self-styled "Bolivarian revolution."

IDEOLOGICAL CLASH But Pacheco rejects this objective as ideologically obsolete and flawed in practice. "The ideological model which says that I must distribute the income that oil produces is a model that creates poverty," he said. He said this would reverse PDVSA's modern role as a market-orientated generator of wealth and economic activity. Pacheco also dismissed Chavez's assertion that he was strengthening national control over PDVSA by sacking the strikers he says are in cahoots with transnational oil firms. "You can't make the industry any more Venezuelan. It is already Venezuelan. The only thing Chavez is doing is saying 'This industry belongs to me, to my government,"' he added. Chavez also said over the weekend that foreign exchange restrictions to be introduced this week would give his government discretional control over the country's dollar revenues. "Instead of giving dollars to speculators, terrorists and saboteurs, we'll be giving them to state companies," he said in a stern warning to his opponents in the private sector. However, Pacheco and his fired PDVSA colleagues seem certain to remain at the center of ongoing negotiations, backed by the international community, to end the Venezuelan conflict. Proposals for a political deal on elections put forth by former U.S. President Jimmy Carter also include a clause which foresees "no reprisals" against the PDVSA strikers. But in an apparent concession to the government, Carter also suggested that strikers found guilty of "sabotage and other crimes" should be punished under the law. Distinguishing between legitimate strikers and "saboteurs" may prove a thorny issue for the government and opposition alike. While they know some of them may never return to their jobs at PDVSA, Pacheco and his colleagues are unrepentant. "Our position is painful and costly but worth it ... (Chavez) may be able to recover oil production, but he can't recover the confidence of the country," Pacheco said. (Reporting by Pascal Fletcher, edited by Gary Crosse; Reuters Messaging pascal.fletcher.reuters.com@reuters.net 58-212-277-2656, pascal.fletcher@reuters.com)

www.vheadline.com Posted: Monday, February 03, 2003 - 12:55:14 PM By: Charlie Hopkinson

Date: Mon, 3 Feb 2003 16:33:32 -0000 From: Charlie Hopkinson charlie@dragoman.co.uk To: Editor@vheadline.com Subject: Foreign Tour Operators

Dear Editor: Dragoman is an overland tour operator that brings in-bound tourists to Venezuela throughout the year.   We operate through Asia, Africa and Latin America and believe that we have fair knowledge of the areas that we visit and good grasp of the political and security situations in the most of the countries that we travel through.

The recent political problems in Venezuela have meant that our programs there have been completely disrupted.

In actual fact it was not directly because of the political and civil unrest that we have had to cancel our trips to Venezuela ... but rather because of the British Foreign & Commonwealth Advice concerning the current situation.

This advise stipulates.... "We advise against all but essential travel to Venezuela, including the island of Margarita, for the time being because of the serious political situation and shortages of food and fuel. If you do have to travel to Venezuela, you should take great care with your security arrangements. If you are already in Venezuela, you should leave the country unless you consider your presence there is essential...."

Tourism is not considered essential.

This advice means that,  no matter what the reality of the situation in Venezuela, we cannot bring tourists to Venezuela.  If we do,  various insurance policies that we hold could be nullified and the company become directly liable for any situation affecting our groups.

• This advice appears to be in conflict with what we are being told by a variety of sources in and around Venezuela.  Not only is this bad for our company, but ten times worse for Venezuela's lucrative tourist industry.

I wonder whether the local tourist industry and the Venezuelans employed within that industry, know that if it were not for the Western Governments advice (which appears to follow the US advice), most inbound tour operators would be bringing tourists back to Venezuela?

What is even more surprising is that we are being advised not to visit Venezuela when there has been no specific threat to foreign tourists ... and yet we are told we can continue visiting Zanzibar in Tanzania, despite a specific threat being issued.

I wonder whether the advice is politically motivated in any way?

I also wonder what Venezuelans feel about the advice that we foreigners are being given.  Do they realize that the outside world is being told that Venezuela is one of  the most dangerous places to visit in the world?

Charlie Hopkinson charlie@dragoman.co.uk

www.vheadline.com Posted: Monday, February 03, 2003 - 1:37:59 PM By: Gustavo Coronel

VHeadline.com commentarist Gustavo Coronel writes: I am, as many VHeadline readers already know, a member of the Venezuelan sector which opposes the continuation of the Presidency of Hugo Chavez.

I also oppose a coup d'etat against the government, similar to the one Chavez attempted in 1992 to unseat democratically elected President Carlos Andres Perez. Perez, as you might remember, was later displaced from the Presidency by the Constitutional action of a true Attorney General, by reasons of misuse of government funds.

For those who remember that process, the reasons utilized at the time by the Attorney General were pale in comparison to the documented (and even admitted by Chavez on national TV) misuse of government funds by the Presidency of Hugo Chavez.

This double standard has a clear explanation ... the Attorney General who forced Perez out was an honest and independent man ... the current Attorney General is a dishonest man, totally subservient to the government.

Where are we now?

At this point in time, the civic national strike is ending in its original form and is being replaced by an open attitude of civil disobedience which will take multiple forms.

After 60 days of significant national stoppage, many commercial sectors are returning to partial activity. The reason is simple ... thousands of small and medium size businesses are financially hurt. Many are already beyond salvation, and most have suffered significantly.

This is the truth.

It would be a mistake, however, to assume that the civic, national strike was simply a self-inflicted wound by those who oppose Chavez. It would also be simplistic to assume ... although I imagine the temptation will be great ... that Chavez has emerged victorious.

The truth is that both sides have suffered tremendous material losses.

The opposition has left thousands of bankrupt private companies on the battlefield, many members of the middle class unemployed and important feelings of frustration and anguish in millions of citizens who wanted a rapid resolution to the crisis.

The government has been left on the brink of insolvency, destroying PDVSA ... its main source of income, is being forced to take the opposition very seriously and obliged, in order to survive, to drop the mask of democracy that had worn with great skill for many months. International opinion about Chavez has now shifted importantly.

In Europe, and the US, they no longer view him as a well-meaning if un-cultured democrat ... they now see him as a throw back to the 19th century type of strong man with a populist and authoritarian approach to power. The failure of this model has been total in the past, and there is no reason to expect any different outcome this time.

An obvious result of the strike has been to illustrate the enormous size of the  population that wants Chavez out ... the size, frequency and geographical diversity of the marches staged by Chavez' adversaries leave little doubt to impartial observers that the majority has long shifted from the government to the opposition ... this has forced Chavez to rely more and more on the armed forces to cling to power.

But we have already seen that once a government loses the required popular support and leans on the armed forces, their survival becomes, at best, a short term proposition.

As I write this, there is a gigantic sign-in going on all over Venezuela. I am not aware of a similar event ever taking place anywhere else. The people of Venezuela decided to stage an "election" ... manning the electoral sites with civilian volunteers ... to ask citizens if they want Chavez to go or to stay.

This is the Venezuelan's answer to the grotesque maneuver by a illegitimate group of the Supreme Tribunal of Justice which invalidated the Consultative Referendum. We are fighting illegality with legality, anti-constitutional force with constitutional power, military savagery with civilized attitudes ... the contrast is so great that the world is finally taking notice.

The outcome of the crisis ... in a favorable scenario for the opposition ... will probably take the shape of a revocatory referendum on August 19, followed by an early Presidential election, as proposed by former President Carter and already accepted by them.

The government has not agreed to this, and is not expected to agree, as they are most unwilling to be counted.

In parallel, the deterioration of the social, economic and political conditions of Venezuela is advancing at such a rapid pace that the pressure for a rapid resolution to the crisis is mounting.

This is a most dangerous ingredient, especially when combined with indications that the government will resort to all legal and illegal maneuvering to stay in power.

If all doors to a civilized, electoral solution are closed by Chavez, this country will erupt in violence. We have already seen that Chavez is an adept to violence ... his actions in 1992 and in April 2002 caused almost 200 deaths.

As governing is clearly beyond his capability, he will resort to force to try to dictate his will to the people. A civil war would be our ultimate tragedy but, unfortunately, this is the preferred Chavez scenario and the only chance he has to stay in power ... provided, of course, that the Armed Forces keep loyal to him instead of being loyal to Venezuela.

This is where we are today.

Venezuela is entering an acute period of economic depression and political degradation. We have inflation at almost 40%, exchange controls, price controls (ineffective and damaging in the long run), a government budget financed by new debt, the media in danger of being closed down, the military confiscating foodstuffs to sell to third parties without accounting for the proceeds, laws being passed in a hurry by the government majority in the National Assembly to obtain definitive control of the Supreme Tribunal of Justice, military officers like the "burping" General emerging as Chavez' main supporters, military officers like General Baduel as shareholders of a TV station which is contracting propaganda with the government, criminals like Orlando Castro ... relatively fresh from prison in the US for fraud ... as one of the intellectual mentors of the government.

We are entering the dark ages and hope Carter ... who looks like Gandalf ... can give us a hand.

PS -- Several sign-in centers of the opposition, all over the country, are being attacked at this moment by violent groups of government "sympathizers" ... this will make some citizens afraid to sign. More than the net effect of these violent activities, what they show is the contrast between real Democracy and Gorilla-ism. Two days hence, on February 4, the government will "celebrate" the failed coup of 1992 ... the immoral celebration of a bloody, criminal coup is yet another sign of the totalitarian nature of this government. Is there now any doubt?

Gustavo Coronel is the founder and president of Agrupacion Pro Calidad de Vida (The Pro-Quality of Life Alliance), a Caracas-based organization devoted to fighting corruption and the promotion of civic education in Latin America, primarily Venezuela. A member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), following nationalization of Venezuela's oil industry, Coronel has worked in the oil industry for 28 years in the United States, Holland, Indonesia, Algiers and in Venezuela. He is a Distinguished alumnus of the University of Tulsa (USA) where he was a Trustee from 1987 to 1999. Coronel led the Hydrocarbons Division of the Inter-American Development Bank (IADB) in Washington DC for 5 years. The author of three books and many articles on Venezuela ("Curbing Corruption in Venezuela." Journal of Democracy, Vol. 7, No. 3, July, 1996, pp. 157-163), he is a fellow of Harvard University and a member of the Harvard faculty from 1981 to 1983.  In 1998, he was presidential election campaign manager for Henrique Salas Romer and now lives in retirement on the Caribbean island of Margarita where he runs a leading Hotel-Resort.  You may contact Gustavo Coronel at email ppcvicep@telcel.net.ve

www.thisismoney.com Monday view, Daily Mail 3 February 2003

WAR in the Gulf seems unavoidable. The only remaining doubts are over its timing, nature and duration. From a stock market perspective, a swift and definitive outcome is essential to restore confidence and reignite the global economy. The oil markets have other worries.

Some point to the last Gulf War and predict a lasting collapse in the cost of crude once the tanks roll into Baghdad. That looks like wishful thinking. Major issues for oil prices have been piling up since the last conflict.

It may be that the Western economies will face the burden of expensive oil for years to come.

The bears argue otherwise. Despite four years of high oil prices, their consensus remains that prices will fall back rapidly to $18 a barrel. In reality, this decade will be remembered for seemingly endless periods of oil at $30 a barrel and petrol at almost 80p a litre.

Saddam Hussein has the ability to change the price of oil for decades. Should Iraq choose to destroy its wells and damage its vast underground reservoirs, the rest of the oil producing world would face a major challenge. In spite of soothing words from Saudi Arabia, even a temporary loss of Iraqi output and capacity would be disastrous.

Under UN control, Iraq has been pumping some 2.6m barrels a day, pretty close to its sustainable capacity. Almost 2m barrels have been exported daily to Western markets.

During any Gulf conflict, this flow is likely to stop. If allied troops move quickly, the taps can be turned back on under UN/US supervision. But world stocks are low, so even a short-lived disruption might trigger a price hike. Stocks should then start to recover and prices could drop.

But if Baghdad sabotages its oil infrastructure, there are big problems. We are already being short-changed by Venezuela thanks to its strikes.

Peak global oil demand is 77m barrels a day. Maximum supply capacity, in spite of billions spent every year by the industry, is stuck below 80m barrels. All the surplus capacity is in the hands of Opec.

That surplus is now less than normal due to quota busting. On a sustainable basis, there may be little more than 3m barrels a day of unused supply. Prolonged loss of Iraqi oil would leave the world pumping virtually every available barrel.

No system can operate for long near 100% of capacity, particularly when it is largely in the hands of unstable suppliers. One more producer glitch would leave the world physically short of oil at a time of low stocks and rising seasonal demand.

The likelihood is that Iraq's oilfields will survive unscathed. A new, benign regime in Baghdad could eventually see sanctions lifted. Iraq has the capability over several years to boost significantly its capacity and exports. But this will not happen overnight, so it is foolhardy to assume that oil prices will decline immediately.

Opec's January agreement to boost supplies is little more than a placebo for a gullible patient. Most producers are already pumping out as much as they can. The deal legitimises recent cheating, but will add little new oil to top up empty tanks.

US market is gearing* up for its summer driving season with low stocks and scant chance of weaker demand. Once again, US motorists can expect to pay $3 a gallon.

A rapid end to war could stimulate stronger economic growth and lift oil demand. Oil prices have been firm for four consecutive years without meaningful demand growth. Supply is expanding too slowly, as evidenced by the failure of the world's major quoted oil companies to increase their output.

The myriad uncertainties plaguing the world's key oil producers will not vanish overnight. Poor handling of Iraq, coupled with the unresolved situation in Israel/Palestine, could mean heightened tensions among the Arab states.

Extra supplies are coming largely from Angola, Kazakhstan, Brazil and Russia. The days of predominantly secure supplies from the US and Europe are ending. Risk to supply has arguably never been greater, so the belief that cheap oil will return is dangerously complacent.

• AFTER 15 years in the City researching the oil industry, Alan Marshall is now a freelance writer and consultant.