Recovery of strike-hit Venezuela oil output slows

www.forbes.com Reuters, 02.09.03, 6:29 PM ET By Matthew Robinson

CARACAS, Venezuela, Feb 9 (Reuters) - Venezuela's efforts to bring back oil output disrupted by a two-month strike by foes of President Hugo Chavez appeared to stall last week as the government struggled to restore production in older fields. Using replacement workers to compensate for striking employees of state oil firm Petroleos de Venezuela (PDVSA), the government in January managed to restore output by about one million bpd, or about 250,000 barrels per day (bpd) every week. Chavez said on Sunday output had now reached 1.9 million bpd, a rise of about 100,000 bpd over the previous week and still short of the 3.1 million bpd pumped before the strike started on Dec. 2. Dissident PDVSA workers, who peg current output closer to 1.3 million bpd, and analysts say the government will find it difficult to restore the remaining oil production. Much of the shut output is located in older fields from the western Lake Maracaibo area that are difficult to restart. Rebel oil workers say it would take months restart these fields. They say oil production cannot be fully returned and that domestic refinery processing, currently about a third of the nation's 1.3 million bpd capacity, cannot be achieved unless they return to work. Chavez, who has already fired around 9,000 of the striking PDVSA employees, said on Sunday the recovery of oil production will continue and that he will take legal action against employees he said "sabotaged" oil installations. "By next week I'm sure we'll be over 2 million bpd," Chavez said on Sunday during his weekly radio and television program, "Hello, President". PDVSA President Ali Rodriguez has said output of 3 million bpd would be achieved in early March. Oil shipments by the world's No. 5 exporter contribute half of government revenues and normally supply over 13 percent of U.S. crude imports. But during the strike, the OPEC nation has been forced to import gasoline to meet internal demand of around 200,000 bpd. ORINOCO OIL STILL SHUT Analysts say restarting four foreign-financed Orinoco projects, which partner PDVSA with international oil majors such as U.S. ExxonMobil (nyse: XOM - news - people) and French TotalFinaElf<TOTF.PA>, represents the government's best chance to add another large volume of oil output soon. Chavez said last Sunday output from the four projects, which had pumped over 400,000 bpd of Venezuela's pre-strike output, would be restored last week. Only the Hamaca project, which is still under construction, has come back on line so far. It is producing around 15,000 bpd of blended crude that is being placed into storage compared with pre-strike levels of about 45,000 bpd. Three other projects which have completed upgrading units that allow the tar-like Orinoco oil to be processed into light, refineable synthetic crude, have not restarted. Project officials said Friday that PDVSA has not been able to guarantee a steady supply of natural gas feedstock needed for upgrading units, and that it was unclear when output would resume. REFINERY OUTPUT Chavez also said on Sunday the giant 940,000 bpd Amuay-Cardon refineries would restart 80,000 bpd of gasoline producing units next week. The hemisphere's largest refining complex is currently processing around 150,000 bpd of crude, but units needed to make finished products have not yet been returned. Striking PDVSA employees, who are attempting to force Chavez out of office, have said the complex units cannot be restarted by replacement workers. Output at the tiny 130,000 bpd domestic El Palito refinery was being restored as well, Chavez said. "Thanks to the workers, the military, and managers in the refinery, it is operational today and producing some 42,000 bpd of gasoline," he announced on Sunday.