June 10 (<a href=quote.bloomberg.com>Bloomberg) -- Repsol YPF SA, Europe's fifth-largest oil company, plans to invest as much as $700 million in Venezuela through 2008 to boost oil production in the South American country.

Miguel Angel Remon, Repsol's vice-president for exploration and production, discussed the investment during a presentation yesterday in Madrid, a Repsol press officer said. Remon didn't provide further details.

The newspaper Expansion today reported that Repsol is in talks with the Venezuelan government to invest about $700 million in an oil project that would double its production in the country.

Madrid-based Repsol may buy as much as 49 percent of a drilling project on the east side of Lake Maracaibo that has a potential output of 250,000 barrels a day, the newspaper said, citing Venezuelan energy officials who visited Madrid yesterday. Repsol currently produces about 100,000 barrels a day in Venezuela, Expansion said.

Repsol in April said it planned to invest an average 3.5 billion euros annually in coming years to boost output in Latin America and North Africa and expand its natural gas business.

By Myra P. Saefong, CBS.MarketWatch.com Last Update: 2:54 AM ET June 10, 2003

SAN FRANCISCO (<a href=cbs.marketwatch.com>CBS.MW) -- The Organization of Petroleum Exporting Countries finds itself in a precarious position.

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Members of the oil cartel, which collectively produce around 40 percent of the world's oil, will meet Wednesday in Doha, Qatar, with a murky view of Iraq's oil exports added to the usual supply, demand and price concerns. OPEC's basket price for seven types of crude oil is near the high-end of its targeted level of $22 to $28 a barrel -- at $27.55 as of Thursday -- and U.S. crude inventories are more than 11 percent below year-ago levels.

"The recent run-up of oil prices and the looming question of the Iraqi supply contributions are putting OPEC in somewhat of a guessing game," said Michael Cavanaugh, an analyst at My Futures Online.

If OPEC cuts quotas, the cartel will be saying it expects Iraq to make a significant contribution. But this idea would backfire if Iraq can't contribute what OPEC expects, and "price uncertainty and volatility could drive crude to new highs," he said.

The cartel will also have to decide how to handle U.S. demand as the summer driving season kicking in, Cavanaugh said.

Recent concerns over tightening U.S. supplies eased last week when the Energy Department reported a 2.3 million-barrel rise in motor gasoline inventories for the week ended May 30.

But that's still down 5 percent from a year ago, and crude stocks are more than 37 million barrels below the year-ago level. Read the full story on supplies.

OPEC risks a "public relations nightmare, if [it] were to cut production now," said Todd Hultman, president of Dailyfutures.com, a commodity information provider.

Iraq: the biggest 'if'

The main reason for OPEC's meeting Wednesday is Iraq -- a member of the cartel that won't even be represented at the table.

OPEC's failure to invite the country that has the world's second-largest oil reserves raises the prospect that the cartel doesn't recognize the interim U.S. leaders there, according to some analysts.

So here's a "slight case for unrest among traders," said John Person, head financial analyst at Infinity Brokerage Services.

Iraq is selling about 10 million barrels of oil that's currently in storage. Read the Financial Times story. But news reports last week said equipment thefts will delay the flow of more oil through a major Iraqi pipeline by two months.

OPEC's decisions will be "influenced by expectations regarding Iraq's ability to resume crude exports," said Thorsten Fischer, an energy economist at Economy.com.

The "dismal state of its infrastructure will prevent Iraq's oil industry from exporting a significant amount of crude oil during the summer," he said, with repairs and upgrades to the outdated equipment taking longer than many analysts expected.

For now, Iraq has started exports of "small quantities" of fuel oil to Jordan and Turkey in barter exchanges for gasoline, according to the Energy Department's latest update.

To cut or not to cut

Oil producers have been giving confusing hints on what they'll decide at the meeting.

Indonesia, Venezuela and the United Arab Emirates are reportedly among those OPEC countries that don't expect a quota cut. OPEC President Abdullah al-Attiyah has said that while members will have to watch the return of Iraqi exports, they won't necessarily need to cut production.

Kuwait said it'll push for a cut, and Algeria has said current supplies are exceeding demand.

Most analysts predict that OPEC will leave its production quota unchanged and continue to monitor Iraq's exports.

At its meeting in April, OPEC decided to take what some analysts deemed a "fuzzy" mathematical approach to the output figures. It raised its production quota to 900,000 barrels in a move to cut 2 million barrels of actual production off the market. The new quota didn't go into effect until June 1, so it's unclear whether OPEC is sticking to its promise.

Most likely, OPEC won't change quota but will issue a statement saying it's monitoring the return of Iraq's oil production closely and will cut production as needed, said Dailyfutures.com's Hultman.

While John Vail, a senior trading strategist at Mizuho Securities USA agrees, he expects the market to see continued "cheating" among OPEC oil producers with "U.S. demand at record levels and private crude-oil inventories at their lowest level for this time of year since the early 1980s."

Cheating takes a toll

High prices have prompted many oil producers to overproduce, and that situation could intensify in the weeks ahead, said Infinity's Person.

He believes the "spigots will open from 'cheaters' within the organization in the coming weeks as prices are extremely rich from a producers' standpoint."

A Platts survey this week said OPEC producers, excluding Iraq, produced 26.35 million barrels per day in May. That's 1.85 million barrels per day above their official quota.

Michael Armbruster, an analyst at Altavest Worldwide Trading, said that Saudi Arabia, the world's biggest oil producer, appears to be more eager to improve its relations with the U.S. after the recent Riyadh terrorist attacks. As a result, it may be more "likely to acquiesce [to] U.S. pressure for more oil and lower prices," he said.

For now, OPEC can afford to "content itself with appealing to member countries to adhere more closely to existing quotas," said Economy.com's Fischer.

Iraq is currently exporting "very little" crude, the U.S. still has low inventories, and provided that OPEC refrains from rampant overproduction, "there is no reason to act now," he said.

If the cartel leaves its quota unchanged, the market will likely "redirect" its attention to compliance and actual production," Fischer said.

"Actual output is really what will determine the pace of inventory rebuilding in the industrialized world and emerging market economies," so that deserves more attention than the OPEC meeting," he said. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

smh.com.au June 10 2003

A Sydney man named in a report by US intelligence agency CIA as having links with al-Qaeda was "not generally a nice person' but was no security risk, an Australian Muslim leader said today.

Keysar Trad, vice-president of the Lebanese Muslim Association, said Bilal Khazal would already have been arrested if he posed any threat.

"He is abrupt, he is abrasive, he's just someone who's not generally a nice person," Mr Trad said.

"He sometimes likes to talk tough (but) he's not a security risk.

"I have not seen anything from the group that he associates with that would pose any risk to the security of Australia."    advertisement       advertisement

A Four Corners program last night said the CIA report alleged Mr Khazal trained in Afghanistan in 1998 and was planning attacks on US interests in Venezuela and the Philippines.

He worked for Qantas until a security review shortly before the 2000 Olympics and now runs an internet site for the Islamic Youth Movement in Sydney.

Foreign Minister Alexander Downer said today Mr Khazal's passport had been revoked because of security concerns.

Mr Trad admitted he had not spoken to Mr Khazal for about seven or eight years, since Mr Khazal left the Lakemba Mosque in Sydney's south-west and began worshiping at another centre.

However, Mr Trad said if any of the people named in the ABC program, such as Mr Khazal, were a security threat, they would be in custody.

"All the concerns that they raised, if these had been genuine security concerns, then why weren't these people arrested? Why weren't they charged with anything?" he said.

"These people roam about freely.

"It just all seems to be a huge beat up because there's such fear out there in the community."

Sunday Times 10jun03

SECURITY at Australia's airports needed an urgent upgrade following claims a former baggage handler at Sydney airport had links to al-Qaeda, the Transport Workers' Union (TWU) said today. The call came as terrorism expert Clive Williams said people working at airports should undergo vigorous security checks before being cleared to go near aircraft.

The former baggage handler, Bilal Khazal, was named in a report by the United States intelligence agency CIA as someone associated with al-Qaeda, the group believed responsible for the September 11 attacks on the US.

An ABC Four Corners program screened last night said a CIA report alleged Mr Khazal trained in Afghanistan in 1998 and worked for Qantas until a security review shortly before the 2000 Olympics.

TWU state secretary Tony Sheldon today said the revelations should be "a wake up call for everyone who has anything to do with security at all of Australia's airports".

Since December there had been more than six separate security breaches at Sydney's Kingsford Smith Airport, including unauthorised access to secure areas and the discovery of suspicious devices, he said in a statement.

"In spite of these breaches, however, there is still no single co-ordinating or responsible body for security checks, standards and arrangements," he said.

"Individual companies are largely being left to their own devices and the Macquarie Bank run Airport Authority refuses to accept it has a direct responsibility.

"The terrifying thing is that nobody really knows what is happening at the airport or across the industry."

Mr Khazal now runs an Internet site for the Islamic Youth Movement in Sydney and was allegedly planning attacks on US interests in Venezuela and the Philippines.

Foreign Minister Alexander Downer said today Khazal had been deemed a threat to Australia's security and his passport had been revoked.

Mr Downer said Mr Khazal was appealing the decision before the Administrative Appeals Tribunal (AAT).

Meanwhile Mr Williams, the director of terrorism studies at the Australian National University, called for vigorous security checks

"I think it is a problem that many of the people who work on the air site at airports haven't been sufficiently cleared and it has traditionally been an area where there's a high turnover of staff," Mr Williams told ABC Radio.

"That certainly does concern me because obviously if you wanted to do something to an aircraft, then if you got somebody you can collude with on the air site, that's really a major security problem.

"We need to clear the people that work on the air site, they should be put through a security clearance process and we shouldn't be employing people whose backgrounds we're not able to check.

"I think that there needs to be a more rigorous approach to that."

Mr Sheldon said the allegations surrounding Mr Khazal alarmed him and he questioned whether there were other people with terrorist links working at Australian airports.

He said there was a good case that people working at airports should undergo security screening.

"There is certainly screening of people going into the police service, there's security screening in a whole series of ways that occur now," Mr Sheldon told ABC Radio.

"The only people I have heard of having security passes taken off them have been, unfortunately, union officials from the Transport Workers' Union for highlighting their security concerns over the last two years.

"But everybody else seems to still get access and there doesn't seem to be a practical way that the Government has stepped in to try and oversee this."

NZOOM Non-Opec Norway, the world's third biggest oil exporter, said on Monday that it had no current plans to cut output and would not automatically match any future measures by Opec to shore up prices.

But Norway's oil minister did not rule out a cut if markets were to become destabilised and prices were at risk of collapse.

"We have no plan for a production cut now - we don't see any reason for a production cut now," Oil and Energy Minister Einar Steensnaes told a joint news conference with visiting Venezuelan Oil Minister Rafael Ramirez.

Steensnaes said that current oil prices were "acceptable."

Ramirez came to Oslo as part of an Opec bid to press nonaligned oil exporters to cooperate with Opec, should it decide to cut output at a meeting in Qatar this week, or later. Opec fears the resumption of Iraqi oil exports will undermine prices.

Steensnaes noted Norway cut its 3.0 million barrel per day output in the first half of 2002, by 150,000 bpd when prices were weak but said that Oslo would not slavishly follow Opec.

"There will be no automatic decision from Norway depending on what Opec does," he said. "The decision is made unilaterally." Norway is the biggest exporter behind Saudi Arabia and Russia.

"I think we managed to stabilise the market in a very problematic situation (in 2002), and we would do that again if necessary," Steensnaes said.

He noted that Norway's revised state budget assumes a price of $US25 per barrel, which he called "normal for the time being."

Oil prices hit fresh 12-month highs on Monday as members of the Organisation of the Petroleum Exporting Countries (Opec) gathered in Qatar. Brent crude in London rose 9 cents to $US27.87 a barrel, and US crude rose 17 cents to $US31.45.

Opec meets in Doha on June 11 and is set to press non-cartel exporters to back its next supply cut.

Earlier on Monday, Ramirez said that non-Opec Mexico was ready to collaborate with whatever Opec decided.

But Ramirez said it was not clear whether Opec would decide to cut output or put off any decision to a later meeting. Prices are at the top end of Opec's $US22-28 preferred price range.

"We don't know at the moment whether we are going to have any production cuts at this Qatar meeting," Ramirez said. "We think that we are going to need another meeting before the conference in September."

"We are going to do whatever is necessary to maintain the price within the (Opec preferred) band," he added.

He said that the market had been strong despite turmoil in Venezuela and Nigeria and the war in Iraq, but it would be the job of the Qatar meeting to make fresh assessments.

"The situation in Iraq is an uncertainty that we have to review, but in any case I believe that the commitment between producers - Opec or non-Opec - is to have stability in the oil market," he said.

Opec invited rival exporters, including Norway, Mexico and Russia, to Qatar, hoping to maintain a fragile partnership that has kept OPEC's basket price near $25 per barrel for four years.

Norway, in line with its customary policy of keeping its distance from the cartel, declined to attend the meeting.