www.bayarea.com Posted on Tue, Mar. 11, 2003 By Rick Jurgens CONTRA COSTA TIMES

SAN RAMON - Oil giant ChevronTexaco Corp., which accounted for 25 percent of U.S. imports of Iraqi crude oil in 2002, hasn't contracted for any shipments from Iraq for a month because of uncertainties related to the threat of war, according to a company spokesman.

"The most recent lifting by the company of Iraqi crude was in late January or early February," said Chris Gidez, a ChevronTexaco spokesman.

Some news reports suggested that San Ramon-based ChevronTexaco -- which imported 41 million barrels of Iraqi crude last year, according to the U.S. Energy Information Administration -- turned off the spigot in order to avoid negative publicity or as a political statement.

But Gidez said that ChevronTexaco's action wasn't the result of a "decision or policy per se" regarding Iraqi oil. "What you look for is reliable, economic sources" of crude oil, and Iraq doesn't fit the bill currently, Gidez said. ChevronTexaco hasn't ruled out future buys of Iraqi crude, he said.

Iraq sits atop the world's second-largest reservoir of oil. While Iraqi oil exports were banned by United Nations sanctions after the Gulf War of 1991, since 1996 ChevronTexaco and other U.S. oil refiners have bought Iraqi crude under the auspices of a UN humanitarian program known as "Oil for Food."

ChevronTexaco imported 3.3 million barrels of Iraqi crude oil during December, all for use at its Richmond and El Segundo refineries. For the year, ChevronTexaco imported 30.8 million barrels of Iraqi crude into California.

During December, Iraq was the source of about one-third, or 923,000 barrels, of the 2.8 million barrels of oil that ChevronTexaco imported for processing at its Richmond refinery, which converts up to 225,000 barrels a day, or about 7 million barrels a month, into gasoline and other products. A barrel is 42 gallons.

All of Richmond's December imports came from the Gulf region: 1.4 million barrels from Saudi Arabia and two 240,000-barrel shipments, one from Kuwait and one from the United Arab Emirates. Domestic crude oil used at the refinery is not reflected in the EIA data.

On Feb. 18, a few weeks after Iraq dispatched its last shipment of oil to ChevronTexaco, Chief Executive Dave O'Reilly told an industry conference in London that it gathered "against a backdrop of conflict and civil unrest -- from Iraq to Venezuela to the Korean Peninsula."

"Petroleum isn't the reason for these conflicts," O'Reilly added. "But it's no coincidence that energy is a central element in each."

Opponents of a U.S. attack on Iraq have frequently argued that a desire to control that energy wealth drives U.S. policy. O'Reilly acknowledged that a majority of Europeans buy that argument: "'No blood for oil' has caught on partly because our industry's reputation is so impaired that the protesters can discredit action in Iraq simply by associating it with us," he said.

The oil industry should respond by stepping up public relations activities to enhance its reputation and by improving its human rights and environmental performance, O'Reilly said.

www.sfgate.com Verne Kopytoff, Chronicle Staff Writer Tuesday, March 11, 2003

Facing a possible war in the Persian Gulf, ChevronTexaco said it has stopped loading oil directly from Iraqi ports in favor of more-reliable sources.

The decision marks a big U-turn for the San Ramon petroleum giant. Until recently, Iraq was an important spigot for the company, despite the escalating tensions there and condemnations by some politicians. ChevronTexaco buys Iraqi oil from third-party suppliers, but does not have its own pumping operations there.

Chris Gidez, a spokesman for ChevronTexaco, said the reversal in company policy "has everything to do with reliability of supply," not public relations.

He insisted that "it's strictly an economic, business-driven issue."

Despite the change, ChevronTexaco left open the possibility of buying Iraqi oil exported by others in the future. Just last week, the company bought part of a shipment of Iraqi crude that was sitting in the Gulf of Mexico.

ChevronTexaco stopped loading oil in Iraq in mid-February, according to Gidez. During the month prior, the company had taken two shipments of Iraqi oil to its Bay Area refinery in Richmond and three more shipments to its refinery in El Segundo, near Los Angeles, according to the Energy Information Agency, an arm of the Energy Department.

ChevronTexaco's California refineries are specially configured for high- sulfur oil, the kind found in Iraq.

Other oil companies, including Valero, ConocoPhillips, Marathon-Ashland and CITGO Petroleum, also bought Iraqi oil recently. They did not return telephone calls Monday seeking comment.

Analysts said ChevronTexaco switched strategies regarding Iraq because it was trying to avoid taking a financial hit in the event of a U.S.-led war in the region. The company would have to pay for tanker ships already en route and be left scrambling for alternate supplies to keep its refineries functioning.

Any disruption could send gasoline prices even higher than their current record levels. The average cost in California for a gallon of unleaded is at an all-time high of $2.08, according to the Energy Information Agency.

Importing Iraqi oil is legal under the United Nation's oil-for-food humanitarian program. Implemented in 1996, the program allows Iraq to sell oil and use the money for items such as food, medicine, irrigation and housing. A portion of the proceeds must also go toward war reparations for Kuwait.

Oil companies such as ChevronTexaco aren't allowed to buy oil directly from Iraq. Rather, they must deal with trading firms that first buy the oil from Baghdad under U.N supervision.

In the past, some politicians have called for prohibiting U.S. companies from importing what they call Iraqi "rogue oil." They said the proceeds support terrorism and contradict the U.S. goal of becoming more energy self- reliant.

Since last year, U.S. oil companies have gradually reduced their dependence on Iraq, mostly because of the tensions there. Average daily imports declined from nearly 800,000 barrels in 2001 to around 200,000 in the fall of 2002, according to IHS Energy Group, a consulting firm in Engelwood, Colo.

A strike in Venezuela's oil fields that started in December renewed demand for Iraqi oil. But production in Venezuela has recovered somewhat since then, providing ChevronTexaco with an alternative, analysts said.

Iraq supplied 4.2 percent of all U.S. crude imports in December, according to IHS Energy. "The loss of Iraq represents a potential pinch, but OPEC, as a whole, will make up for any shortfall of Iraqi exports," said Pete Stark, vice president of industry relations for IHS Energy.

The Organization of Petroleum Exporting Countries is meeting this week in Vienna, partly to discuss increasing oil production in the event of a war in Iraq.

Gidez, from ChevronTexaco, said his company may indeed return to Iraq when the situation there is more stable. In the meantime, he said, the firm will rely on other sources, which he declined to identify.

"If we can ensure alternative sources, that's fine," he said. "In the future, if Iraq offers a reliable economical supply, that's fine too."

E-mail Verne Kopytoff at vkopytoff@sfchronicle.com.

news.ft.com By Nicholas George in Oslo Published: March 10 2003 22:00 | Last Updated: March 10 2003 22:00

Statoil, the Norwegian oil and gas group, may consider issuing new shares to fund its ambitious international expansion but would look for financial, rather than strategic, investors as originally planned by the government.

Norway's largest company was partially privatised in June 2001 when the government sold an 18 per cent stake through an initial public offering and said a further 15 per cent could be placed with strategic investors. At present market value, the 15 per cent stake would be worth about NKr18.5bn ($2.6bn).

It has been speculated that the most likely home for the stake would be a European downstream partner such as Germany's Ruhrgas or Gaz de France. More recently it has been suggested the equity could be swapped for oil and gas assets abroad.

But Olav Fjell, chief executive of Statoil, said he was cool on the idea of a strategic placement and it was not "written in stone" at the time of the privatisation.

Instead, Mr Fjell believes the state's stake could be diluted by a new issue to the two-thirds level approved by the Norwegian parliament.

"Should there be an opportunity that we saw for an investment that would require new equity, we would take it up with the state and discuss it.

The new cash would be used to finance international expansion as it tries to break its dependence on the Norwegian continental shelf.

Last year less than 10 per cent of the company's oil and gas production of 1.07m barrels a day came from its non-Norwegian reserves, a figure it aims to increase to 40 per cent by 2012.

Outside Norway, Statoil is keen to develop its operations in the Caspian Sea, Venezuela, West Africa and Iran. With the big oil and gas companies now concentrating on profitability rather than production targets, assets were up for sale, Mr Fjell said.

www.sundayherald.com By John Phelps

WOOD Group, the Aberdeen-based energy services company that swept the board at last week's Scotland plc Awards, could face a cooler reception from investors tomorrow when it checks in with its first set of annual results since floating on the stock exchange last year.

Through no fault of its management, led by chairman and chief executive Sir Ian Wood, the bulk of Wood Group's more recent investors are sitting on sizeable losses following a sharp fall in the company's share price since the group made its splash on flotation last May.

The shares, offered for sale at 195p each, quickly climbed to 230p early last summer but are now trading at just 145p amid stock-market worries about the impact of the crisis in Venezuela and fears over the pending conflict in Iraq.

Small shareholders may fret but the biggest losers are the Wood family who still own 48% of the company and have seen their investment decline from more than £500 million to a current level of around £275m.

Despite the share-price slide, Sir Ian is expected to confirm that his company has gone some way towards justifying its new title of Scotland's plc of the Year by matching earlier forecasts of maiden annual profits of around £76.5m.

He will emphasise that the Middle East as a whole only accounts for about 6% of business, a similar level to its exposure in South America, and that the group has a high degree of protection through its spread of business activities in more than 30 countries around the world.

These activities include an increasing involvement in safe areas such as the Gulf of Mexico and the US while Wood's work in the North Sea includes project management and detailed engineering for BP Clair, the largest current new field development.

The group also has expanding interest in gas turbines services and has high hopes for its new test facility in Aberdeen which has been carrying out work for Alstom Tornado and Typhoon light industrial turbine engines.

Wood is also in a comfortable situation to ride out current uncertainties because of the strength of its balance sheet following the flotation -- net debts worked out at around £131m at the end of June, just 27% of the value of the group's net assets.

While prospects must be clouded by current global uncertainties, most brokers believe Wood Group is poised for further growth in the current year and a consensus produced by Multex forecasts an increase in earnings before interest, tax, depreciation and amortisation from £100m to £122.7m.

Their optimism reflects the chairman's own view that the business can continue to grow in a hostile climate.

'The group has the management team, strategy and market opportunities to continue to develop a major international energy services business capable of delivering significant growth in shareholder value,' he said.

Those who clambered aboard last year's flotation must be hoping that he is right.

As things stand, the forecasts illustrate the huge strides made under Sir Ian, who was feted as Scottish chief executive of the year at last week's awards dinner. When he took over the family business in 1964, it was mainly involved in fish processing and farming before he steered it into new areas such as ship repair and sheet metal. Then, in 1972, Sir John spotted the potential of the nascent North Sea oil industry.

Despite almost breaking the $40-a-barrel mark 10 days ago, oil prices were more stable on Friday ahead of a key report on Iraq by United Nations weapons inspector Hans Blix. After Blix delivered a mixed report on the disarmament process in the country, Brent crude futures for April initially rose 26 cents to $33.79 a barrel, while US light crude rose 50c to $37.45 a barrel.

One US oil analyst admitted that crude oil would continue to remain hostage to higher prices because inventory levels were now at record lows.

'There seems to be no chance for immediate relief as Opec [the Organisation of the Petroleum Exporting Countries] is also at the upper end of its production limits,' he said.

Oil prices have been volatile in recent weeks, with the threat of war in the world's eighth-largest oil exporter combining with fears about world energy stocks and the effects of strike action in Venezuela.

Iraq's deputy oil minister warned on Friday that if a US-led invasion begins, the price of oil could reach $70 a barrel.

After US markets reacted badly to disastrous US jobless figures and several poor company results, the FTSE-100 closed on Friday 63.8 points, or 1.79%, lower at 3491.6, having earlier slid as much as 2.3%.

www.woodgroup.co.uk

www.forbes.com Reuters, 03.06.03, 5:36 PM ET By Bernie Woodall

NEW YORK, March 6 (Reuters) - The biggest U.S. oil companies have backed away from buying Iraqi crude as looming war in the country makes purchases too much of a risk, government figures show.

The threat of a public backlash at firms buying Iraqi oil and concern that Iraqi supplies might be cut off by war are too great, analysts said.

ChevronTexaco (nyse: CVX - news - people), the biggest buyer of Iraqi crude in late 2002, has stopped taking shipments from Iraq as the Bush Administration closes in on war, a spokesman said.

"We've developed economic alternatives," said ChevronTexaco spokesman Chris Gidez. "This is a prudent, business-driven decision."

The top previous U.S. buyers of Iraq crude oil -- Exxon Mobil (nyse: XOM - news - people), Valero (nyse: XOM - news - people), privately held Koch and ChevronTexaco (nyse: XOM - news - people) -- have ceased or greatly slowed their purchases of Iraqi oil, the U.S. Department of Energy says.

"It's mom and apple pie here. Consumers are looking at the source of oil and people are very unhappy about doing business with companies that are buying from Iraq right now," said oil analyst Peter Beutel of Cameron Hanover of Connecticut.

While U.S. refiners take most of Iraq's exports, no U.S. companies purchase Iraqi crude directly from Baghdad. Rather, middleman trading firms usually buy Iraq's crude from Baghdad under U.N. supervision and then resell it to U.S. refiners.

According to European shipping sources, the last cargo of Iraqi crude that was sold to ChevronTexaco, was shipped in late January,

Exxon Mobil purchased 89,000 barrels per day (bpd) of Iraqi crude oil through the whole of 2001, but none at all in November and December, the latest U.S. government figures show.

Valero (nyse: VLO - news - people), one of the biggest U.S. refiners, has cut back from 152,000 bpd throughout 2001 to 49,000 bpd in the fourth quarter, the figures show. Koch which took 84,000 bpd over the year, took none in the fourth quarter. The companies declined comment.

FOREIGN FIRMS STILL BUYING

While Iraqi crude is still coming into the United States, it is foreign-owned oil companies such as France's TotalFinaElf <TOTF.PA> and Venezuela's U.S. affiliate Citgo that are bringing the oil into the country, according to government figures.

In the first two months of this year Iraq shipped just over 1 million barrels a day to the United States -- some 67 percent of the Iraqi crude sold officially in the U.N.-administered oil-for-food program, industry sources said.

Iraq has since December 1996 sold crude oil through the U.N. "oil-for-food" program, an exception to 1990-91 Gulf War sanctions that allows Iraq to export oil and use the revenue to buy food and humanitarian goods for its citizens.

ChevronTexaco usually likes to buy Iraq's sour crude for its refineries in California and Louisiana because its specifications closely match the needs of those refineries.

Iraq has a sustainable export rate of about 2.2 million barrels daily. But exports have lagged since late 2001 as an illegal surcharge outside the U.N. program that the Iraqi government demanded from its oil customers discouraged international firms from buying Iraqi oil.

INSECURE SUPPLY

After Baghdad dropped the surcharge last September, some U.S. companies, such as ChevronTexaco, initially stepped up purchases of Iraqi crude.

But the threat of imminent war as the Bush administration resolves to disarm Iraq using military force if necessary has made Iraqi crude too risky.

"It's the uncertainty. Companies are worried about the supply. They want to be sure they can lift and they can't be sure going into a war," said analyst Raad Alkadiri of The Petroleum Finance Co. in Washington.

Iraqi exports are widely expected to halt in the event of military action in Iraq and oil traders are wary of hefty cancellation charges that tanker owners impose to compensate losses if loadings cease

Many refiners -- now making their best profits in years as gasoline and heating oil prices rise -- are also nervous about relying too heavily on Iraqi oil.

"If you're loading early next week there's a good chance the oil will be there, but then you run the risk of waiting too long to try to sell," said one trader.

While ChevronTexaco has stopped buying Iraq's oil globally, Exxon Mobil continues to purchase Iraqi crude oil as long as it does not go to the United States, industry traders said.