Venezuelan Oil Output May Stay Low Even After Strike Ends

sg.biz.yahoo.com Friday February 14, 3:55 PM

Despite a recent rebound in production, Venezuela's oil industry is expected to remain hobbled indefinitely even after the current strike is settled, Friday's Wall Street Journal reported.

This could leave global petroleum markets vulnerable in the event of war with Iraq and increase the prospect of further gasoline-price increases.

Industry experts and striking workers said Venezuela's state oil concern, Petroleos de Venezuela SA, is unlikely to restore more than two-thirds of its prestrike output this year. They said the company is hindered by a lack of experienced employees and managers. Moreover, wells were damaged as workers shut down fields Dec. 2 in a strike aimed at forcing Venezuela President Hugo Chavez from office. Foreign petroleum firms, which produce about 400,000 barrels a day of heavy oil in joint operations with Petroleos de Venezuela, said they are hamstrung as well.

Petroleos de Venezuela produced three million barrels of petroleum a day before the walkout, which made it the world's fifth-largest oil producer and the fourth-largest exporter to the U.S. Although the strike is continuing, analysts said the company has restored output to about 1.4 million barrels daily. Mr. Chavez said production is 1.9 million barrels a day. In any case, experts said Venezuela will be hard pressed to produce much more than that.

The Organization of Petroleum Exporting Countries has sought to offset the Venezuelan losses, but U.S. oil inventories have plummeted to 269.8 million barrels, their lowest level since 1975, according to the U.S. Energy Information Agency. Low stocks in addition to war fears have helped send the price of petroleum soaring, with the U.S. benchmark surging to $36.36 a barrel Thursday, up 59 cents, in trading on the New York Mercantile Exchange.

Wall Street Journal Staff Reporters Thaddeus Herrick and Alexei Barrionuevo in Houston, and Marc Lifsher in Caracas, Venezuela contributed to this report.