Venezuela Wants Share Of OPEC Boost Eventually -Sources

sg.biz.yahoo.com Saturday January 11, 8:01 PM By Fred Pals Of DOW JONES NEWSWIRES

VIENNA (Dow Jones)--At OPEC's extraordinary meeting this Sunday in Vienna, troubled Venezuela can only sit tight and nod in agreement with OPEC's decision to boost oil production in an effort to ease world oil prices.

But by sending both Oil Minister Rafael Ramirez and the president of state-owned oil monopoly Petroleos de Venezuela (E.PVZ), or PdVSA, Ali Rodriguez - a former OPEC Secretary General - to the meeting, President Hugo Chavez wants to make sure the country gets its share eventually, oil ministry sources say.

The two top officials want OPEC to get the message that Venezuela will return to its production levels of around 3 million barrels a day pumped before a general strike began 42 days ago. "We don't see the need for much new oil. But we want to make sure that part of the barrels now being put on to the market by other members to make up for our shortfall eventually will get back to us," an oil ministry source, who declined to be named, said Saturday.

In telephone talks with Iran's President Mohammed Khatami, Chavez Friday voiced concern about measures taken by some OPEC members to raise their output ceiling. There are signals OPEC will agree on the usual increase shared equally across its members, excluding Iraq. A temporary allocation of the extra barrels may also be agreed. The reality, however, is likely to see OPEC's kingpin Saudi Arabia make up for most of Venezuela's shortfall. "It may be difficult, but we need to convince OPEC we're able to get back to our usual production levels," said another Venezuelan government source, who also declined to be named.

Indeed, Venezuela's plea may fall on deaf ears as most industry observers question the country's ability to bring state-owned oil giant PdVSA back to its feet anytime soon.

Analysts agree it will take the company months to bring output capacity back to slightly more than 3 million b/d.

The nationwide strike that started Dec. 2 has crippled the vital oil industry and slashed production and exports to less than 20% of their usual level.

Production is seen at only around 400,000 b/d or less. Exports remain marginal. Refinery activities also are paralyzed, with some refining taking place at the 100,000 b/d Puerto la Cruz refinery in eastern Venezuela.

OPEC is gathering Sunday to discuss the volatile world oil markets that has driven the oil price up to around $30/bbl. Apart from the Venezuelan shortfall, OPEC also has to deal with the prospect of a war between the U.S. and Iraq and a seasonal downturn in consumption starting in the second quarter.

The International Energy Agency, the energy watchdog of the world's richest nations, said Friday that OPEC needs to increase oil output by more than 2 million b/d to offset the loss of Venezuelan oil. OPEC members have said a boost of 1 million-1.5 million b/d is being discussed. A 2 million b/d boost is seen as too much.

Chavez Continues PdVSA Purge; Referendum May Be Postponed

Meanwhile, Chavez's efforts to continue his purge at PdVSA won't help to convince OPEC the company will soon recover. Chavez announced Friday that he had sacked 1,000 employees since the strike started. "The revolutionary government is standing firm," Chavez said. "An oligarchy ... has reared like a poisonous serpent to destroy the path of justice that we are paving. The people and our morals won't let them." At least 30,000 of the company's 40,000 workers are participating in the strike.

Chavez said the government would have to invest "thousands of millions of dollars" if the oil industry is to recuperate. He urged Venezuela's attorney general to imprison strikers, whom he called "criminals" and "traitors to the country." Analysts, however, question the government's ability to keep PdVSA running with untrained personnel and replacement crews.

Early last week, Oil Minister Rafael Ramirez announced PdVSA will eventually have two centers of operation, in the east and west of the country, adding that much of its headquarters in Caracas will be dismantled. He didn't say how many of the 7,000 employed at the Caracas HQ will lose their jobs. A majority, however, are on strike and the government has vowed to dismiss those who are on strike.

The strikers, backed by a range of business, labor and political leaders, want Chavez to resign and early elections to follow.

Chavez, however, has refused to give in. A referendum on his rule scheduled for Feb. 2 may be postponed. Chavez says Venezuela's constitution only permits such a referendum halfway into his six-year term, or in August.

-By Fred Pals, Dow Jones Newswires;0043-664-5446851; fred.pals.dowjones.com