Venezuelan Oil Minister Expects Normal Output Soon

Breaking News By Fred Pals Of DOW JONES NEWSWIRES

CARACAS (Dow Jones)--Venezuelan oil refining, export and production operations should return to normal by the end of next month, the nation's oil minister told foreign reporters at a briefing Monday, noting that the strike-plagued country is currently producing between 600,000 and 700,000 barrels per day of crude oil.

"By next week, production should stand at 1.2 million barrels per day and I think we can reestablish all operations within a month," Rafael Ramirez said.

Ramirez said the government is currently giving priority to ensuring the domestic supply of gasoline before focussing on the export of crude and refined products. But Ramirez said that the massive 930,000 b/d Paraguana refinery complex, which produces mostly for the U.S. market, should be restarted within three weeks. It will take probably another two to three weeks to take the plant back to full capacity, he added.

The 130,000 b/d El Palito refinery is the first that should be back at full capacity, within ten days, he said. The 200,000 b/d Puerto La Cruz refinery is now at 80% of its capacity, Ramirez said.

"For some time, we will have distortions on the world oil markets due to this situation," he added. Early Monday on the New York Mercantile Exchange, crude hit an intraday high of $33.45 per barrel, the highest level in more than two years as the situation in Venezuela, coupled with the threat of war in Iraq, supported rising prices.

Industry observers are questioning the government's production figures, claiming that output only stands at slightly less than 200,000 b/d while refinery operations are down for the most part.

A nationwide strike that entered its fifth week on Monday has crippled the oil industry, and there seems to be no end in sight to the standoff. President Hugo Chavez reiterated Sunday he wouldn't give in to the opposition's demand that he resign from his post.

Before the strike began, Venezuela's total oil output was around 3 million b/d.

(MORE) Dow Jones Newswires 12-30-02 1147ET

With the planned restart of refineries and the import of gasoline from Trinidad, Brazil and PdVSA's Isla refinery in Curacao, Ramirez said the gasoline deficit will come to an end in the next couple of days.

The government may, however, need to continue imports of gasoline throughout January. "But we've already won this battle," he added.

He further said the government is taking control of all installations with replacement crews. The government is also trying to persuade technicians and administrative staff to stay on the job or go back to work if they've been on strike.

Now that more trained personnel have been hired to replace striking dock crew, Ramirez noted that a pool of major insurance companies have declared Venezuelan ports safe. That makes loading procedures and shipments of crude and refined products possible.

The government will first empty storage facilities that are now fully filled. "And if we manage to handle more shipments, we've removed the bottleneck for the refineries," he said. During the past few weeks, the government was forced to cut refinery operations as shipments were not taking place and storage facilities were full.

Ramirez said the strike has resulted in a loss of $2 billion for the country due to lost revenue and damage to oil installations.

He noted that the government now will profoundly shake up PdVSA. "The company as we've known it won't return," he said. Some 90 managers have already been fired while the dismissal of another 200 is being evaluated.

Ramirez added the government won't hesitate to cut more jobs due to an "excess in bureaucracy." He said about 6,000 people are employed in Caracas and Maracaibo. "We now find out that that is not needed," he said.

In the first week of January, an international consultancy firm should have a study ready on PdVSA's organizational structure.

Company president Ali Rodriguez is now managing PdVSA while managers Felix Rodriguez and Luis Marin report to Rodriguez and handle operations in the east and west of the country.

Ramirez declined to comment on whether the government is mulling the sale of its wholly-owned U.S. subsidiary retailing chain Citgo. "You can't say the idea of having Citgo is bad, but you can discuss the entire refinery structure as we have it now," he said. PdVSA has a vast refinery network in the U.S., Europe and the Caribbean.

Ramirez further said that some members of the Organization of Petroleum Exporting Countries, or OPEC, have supported Venezuela by supplying "here and there some extra oil." Ramirez declined to provide further details.

He also said he was in constant consultations with officials of the U.S. government to resolve supply problems. Venezuela, the world's fifth-largest exporter of oil, is one of the main suppliers of crude oil and refined products to the U.S.

Analysts have said oil prices could spike even further if the disruption of Venezuelan oil supply continues throughout January and the U.S. decides to invade Iraq.

By Fred Pals, Dow Jones Newswires; 58212-5641339; fred.pals@dowjones.com;

(END) Dow Jones Newswires 12-30-02 1319ET