Opec eyes cuts as Venezuelan oil returns

news.ft.com By Carola Hoyos in London and Andy Webb-Vidal in Caracas Published: February 5 2003 4:00 | Last Updated: February 5 2003 4:00

The return of Venezuelan exports is prompting the Opec oil cartel to consider reining in crude oil production, despite the advancing beat of Washington's war drums.

Bijan Namdar Zangeneh, Iran's oil minister, said yesterday: "If we have Iraq and Venezuela sustaining production, I'm sure we will have to reduce production in the second quarter."

World oil seasonal demand usually drops 2m barrels a day in the second quarter of the year, a factor - together with Iraq and Venezuela - that Opec ministers will have to take into account when they meet to review their 24.5m b/d output quota next month.

Crude oil production from Venezuela has recovered at a faster pace than many analysts expected, following the strike by managers at Petróleos de Venezuela (PDVSA), the state oil company.

Venezuela was producing 3.2m b/d in November, and the stoppage left output as low as 150,000 b/d at one point in December.

Ali Rodriguez, head of PDVSA, said output had now reached 1.8m b/d, and "near-normal" levels would be reached by the end of February.

But there is scepticism about the current figure, and even more about the chances of PDVSA being able to raise output much above present levels in the coming weeks, due to the lack of experienced technicians for the maintenance of oil wells and facilities.

Dissident PDVSA managers, several thousand of whom have been dismissed and appear unlikely to return, say crude production currently stands at 1.2m b/d and is close to reaching a "technical ceiling" of 1.5m b/d.

Cashflow problems are likely to prevent PDVSA from carrying out vital investment to keep up capacity, particularly from its heavier oilfields, analysts say.

"We don't see them reaching 2.5m before the end of the year - it's going to ramp up quite slowly here," said Fareed Mohamedi, chief economist at PFC Energy, a Washington-based consultancy. Local oil industry sources estimate that exports currently stand at about 500,000 b/d, almost all of which is crude oil.

So far PDVSA has been using its own vessels to carry its exports, but Dow Jones news wires reported yesterday that a major international shipping company had received the green light from insurers to again load oil and products from Venezuela.

The situation within the country continues to look bleak, however.

PDVSA has so far been unable to restart its Paraguaná refinery, the world's largest, and fuel shortages, which are still acute in many parts of Venezuela, look set to continue for some time.

The government said yesterday that it would import 12m barrels of petrol to meet demand in February - enough to satisfy the country's daily consumption levels.