www.forbes.com Reuters, 02.28.03, 9:43 AM ET

CARACAS, Venezuela (Reuters) - Venezuela has temporarily shut in between 450,000 to 500,000 barrels per day (bpd) of oil production in the east as storage tanks have bulged and export loadings from the Jose port have slowed over the past three days, an official from state oil firm PDVSA and rebel oil workers said on Friday. A PDVSA manager told Reuters up to 500,000 bpd of oil production in eastern Venezuela had been shut in, but that output could begin to recover over the weekend as loadings of crude resumed cleared out the bottleneck at ports. Venezuela has been struggling to restore its oil production after a strike started Dec. 2 by foes of President Hugo Chavez slashed production from 3.1 million bpd in November. Dissident PDVSA oil employees said that around 450,000 bpd of oil output had been shut down and that the OPEC nation was currently pumping 1.13 million bpd. On Thursday, the government said production was 2.08 million bpd.

sg.biz.yahoo.com Thursday February 27, 11:33 PM

CARACAS -(Dow Jones)- The fiscal contribution of Venezuela's state-owned oil monopoly Petroleos de Venezuela to the state dropped by 75% during the first quarter this year as a result of the strike at the oil behemoth, local paper El Universal reported Thursday.

The loss represents about 936 million bolivars (1$VEB1598) that under normal circumstances would have been given to the state in royalties, the head of the Finance Commission at the National Assembly was quoted as saying. "We've never witnessed a drop of this magnitude before," Rodrigo Cabezas said. Cabezas is a member of the ruling government party. He couldn't be reached for additional comment.

A nationwide strike was joined by the vast majority of PdVSA employees in December last year and crippled oil production and exports. Only during the past few weeks has the oil sector shown signs of recovery. Production is seen at somewhere between 1.5 and 2 million barrels per day while oil exports are hovering at 1.2 to 1.5 million b/d. Venezuela's pre-strike production level was 3 million b/d.

Oil revenue account for 30% of GDP, half of government revenue and 80% of exports revenue. PdVSA is now trying to keep investment plans up by tapping additional money from the Macro Economic Stabilization Fund, or FIEM. The company already withdrew $318 million last week out of the total $1.1 billion it plans to take out of the Fund.

By Fred Pals, Dow Jones Newswires; 58212-5641339; fred.pals@dowjones.com;

reuters.com Thu February 27, 2003 04:01 PM ET (The following statement was released by the rating agency)

NEW YORK, Feb 27 - Moody's Investors Service confirmed the Ba3 senior implied and senior unsecured long-term ratings of CITGO Petroleum Corporation, concluding a review of those ratings for possible downgrade. The outlook for those ratings remains negative.

At the same time, Moody's assigned a rating of Ba2 with a negative outlook to CITGO's $200 million senior secured Term B Loan. The ratings confirmations reflect CITGO's enhanced liquidity position following the expected completion of three financings totaling $950 million.

The financings will alleviate near-term liquidity stress stemming from the disruptions in crude deliveries under CITGO's long-term crude supply agreements with affiliates of its parent, Petroleos de Venezuela (PDVSA, rated Caa1, developing outlook). They include a $550 million Senior Note issue and a $200 million senior secured three year term loan, together providing $750 million of new cash, and a $200 million accounts receivable facility that will provide replacement funds for a similar recently canceled facility. These funds will help address CITGO's working capital needs, including the impact of shortened payment terms on third party crude purchases and maturing bank letters of credit that will need to be repaid or refinanced.

Moody's also has factored into the ratings the expectation that, to the extent CITGO maintains adequate liquidity for its own internal needs, these financings will provide cash to retire some portion of PDV America's $500 million of senior notes that mature in August 2003. The Ba2 rating for the senior secured loan, which is one notch above CITGO's senior unsecured ratings, reflects the underlying quality of the pipeline assets and liquidity of the stock being provided as collateral to lenders.

The $200 million loan will be secured by CITGO's 15.8% equity stake in Colonial Pipeline Company (rated A2/Prime-1) and 6.8% stake in Explorer Pipeline Company (rated Prime-1), two common carrier product pipelines with stable cash flows and fairly ready equity valuations based on cash flow multiples and other recent transactions. Moody's is maintaining a negative outlook on all the ratings, reflecting continuing uncertainty over the impact of reduced crude production and exports from Venezuela on CITGO's operations and working capital needs, and the possibility that future actions by CITGO to undertake additional secured financings could result in the notching down of its senior unsecured ratings. The rating agency notes that PDV America Inc. continues to be rated Caa1 with a developing outlook.

CITGO's recent financings increase the likelihood that dividends will be available to retire at least a portion of PDV America's $500 million senior notes at maturity. However, the dividend will be subject to CITGO's own liquidity needs, and PDVSA's other cash sources to retire PDV America's debt are uncertain at this time.

CITGO Petroleum Corporation is headquartered in Tulsa, Oklahoma.

www.kansascity.com Posted on Thu, Feb. 27, 2003 By JUAN FORERO The New York Times

CARACAS, Venezuela - Tankers are once again setting sail from Venezuela, loaded with crude oil bound for the United States.

Meanwhile, government planners busily try to rebuild and reorganize state-owned Petroleos de Venezuela, pondering how to function with 40 percent fewer workers.

Oil, the lifeblood of Venezuela's economy, is flowing again after a paralyzing two-month national strike. Production is now topping 2 million barrels a day, say officials of the $46 billion-a-year company. They predict that Venezuela's oil industry, with a leaner government-run company leading the way, will soon be back to pre-strike production.

"We are getting close to normal," said Enrique Salazar, a loading master on the Caribbean coast, peering from a control room as a tanker, the Morichal, took on 25,000 barrels an hour.

But oil analysts and economists say the government's rosy picture hides a painful truth about a 27-year-old company that was born when Venezuela nationalized oil production.

Petroleos de Venezuela has lost $4 billion in exports and nearly 16,000 workers, fired by the government for taking part in a walkout aimed at debilitating President Hugo Chavez's left-leaning government. That financial blow, and the loss of workers with 17 years of experience on average, could permanently hobble the company, keeping it from assuming its role as a leading world oil provider, analysts here and abroad say.

"It will not be the company it once was," said Mazhar al-Shereidah, an oil economist in Caracas who helped write oil regulations for the Chavez government. "For a country that depends on petroleum, now more than ever, the challenges are too great. You have to pray for Venezuela."

The dire predictions, if true, would indeed be disastrous for this country of 24 million, which depends on oil for half of government revenues and 80 percent of exports. It would also leave the United States -- which has counted on Venezuelan oil for decades -- without one of its most reliable suppliers as war with oil-rich Iraq promises to batter energy markets.

The obstacles in the aftermath of the strike, which ended in early February, are daunting. A lack of maintenance has caused sand to build up in the gelatinous deposits and caused the pressure to drop, making some fields worthless and threatening to cut production capacity by 300,000 or more barrels a day.

And perhaps most troubling is that no one knows what Chavez's government has in store, though it has promised a wholesale revamping of what was once the world's second-largest oil company.

Reports from international analysts are blistering. UBS Warburg predicts that oil's contribution to gross domestic product will fall 22 percent this year, with Venezuela facing "a fiscal crisis of major proportions." Fitch Ratings said Venezuela's "image as a reliable crude oil supplier has been undermined" and will he hard to recover.

Analysts say the lack of technical expertise and the company's financial straits mean that Petroleos de Venezuela will be unable, in the short term, to reach pre-strike production levels, when Venezuela was a top 10 producer and the world's fifth-largest oil exporter. Most recent production has been in fields that were easiest to restart, leading independent analysts to predict that Venezuela will, at best, produce 2.3 million barrels daily by the end of this year.

"We believe the company's role in Venezuela society has been permanently altered," Deutsche Bank recently reported. Assuming average daily production of 1.7 million barrels for the year, the bank estimated that oil revenues will reach only $14.1 billion, down nearly 50 percent from 2001.

The government is already preparing for the worst. The 2003 budget for the oil company was cut by $2.7 billion, to about $6 billion, while the income the government draws from oil is forecast by UBS Warburg to fall from $11.5 billion in 2002 to as little as $5 billion this year. The sharp drop will make it especially difficult to raise the $5 billion the company would have spent to keep production steady.

Ali Rodriguez, the former leftist guerrilla who is now president of Petroleos de Venezuela, does not gloss over the obstacles. But in an interview, Rodriguez said the doomsday predictions originate with dissident executives who hoped to undermine international confidence in the oil company to weaken Chavez.

He predicted that through sharp budget and personnel cuts, the company will reach 3.1 million barrels a day. And "with its resources," he said, "it is perfectly possible that it will even surpass that level."

Oil analysts warn that the company will be debilitated for years from the loss of experienced workers. Those employees -- executives, office workers, engineers and highly trained technicians -- joined the walkout and, in some cases, damaged computers and software and stole files to hinder reactivation efforts.

Chavez, who has referred to the employees as traitors and fascists, has promised that they won't be rehired.

But already, oil analysts say, the shortage of experienced workers is being felt in every corner of the company. In the patents and technology department, which develops technology for exploration and refining, 800 were fired. The department that trains executives has lost hundreds, as has the department that contracts with oil purchasers.

"Even if you replace the bodies, you don't replace institutional memories," said Larry Goldstein, president of the Petroleum Industry Research Foundation, an industry-supported analysis group in New York. "It's a hidden loss. You can't touch it or taste it, but it's there."

www.iht.com Juan Forero NYT Thursday, February 27, 2003   CARACAS Tankers are once again setting sail loaded with crude oil bound for the United States, while government planners busily try to rebuild and reorganize the state-owned Petroleos de Venezuela SA, pondering how to function with 40 percent fewer workers. Oil, the lifeblood of Venezuela, is flowing again after a two-month national strike, with production now topping 2 million barrels a day, leaders of the $46 billion-a-year oil company say. They predict that Venezuela's oil industry, with a leaner government-run company leading the way, will soon churn out 3.1 million barrels daily, matching the pre-strike level. "We are getting close to normal," said Enrique Salazar, a loading master on the Caribbean coast, peering from a control room as a tanker, the Morichal, took on 25,000 barrels an hour. But oil analysts and economists say the government's rosy statements hide a painful truth about a 27-year-old company that was born when Venezuela nationalized oil production and quickly became one of Latin America's more highly regarded multinational companies. Petroleos de Venezuela has lost $4 billion in exports and nearly 16,000 workers, fired by the government for taking part in a walkout aimed at debilitating President Hugo Chavez's left-leaning government. That financial blow and the loss of workers with, on average, 17 years of experience could permanently hobble the company, keeping it from assuming its role as a leading world oil provider, analysts here and abroad say. "It will not be the company it once was," said Mazhar Shereidah, an oil economist in Caracas who helped write oil regulations for the Chavez government. "For a country that depends on petroleum, now more than ever, the challenges are too great. You have to pray for Venezuela." The dire predictions, if borne out, would be disastrous for this country of 24 million people, which depends on oil for half of its government revenue and 80 percent of export earnings. It would also leave the United States - which has counted on Venezuelan oil for decades - without one of its most reliable suppliers as war with oil-rich Iraq promises to batter energy markets. The obstacles in the aftermath of the strike, which ended in early February, are daunting. A lack of maintenance has caused sand to build up in the gelatinous deposits and the pressure to drop, making some fields worthless and threatening to cut production capacity by 300,000 or more barrels a day. And perhaps most troubling is that no one knows what Chavez's government has in store, though it has promised a wholesale revamping of what was once the second-largest oil company in the world. Reports from international analysts are blistering. UBS Warburg predicts that oil's contribution to gross domestic product will fall 22 percent this year, with Venezuela facing "a fiscal crisis of major proportions." Fitch Ratings Inc. says Venezuela's "image as a reliable crude oil supplier has been undermined" and will be hard to recover. Analysts say the lack of technical expertise and the company's financial straits mean that Petroleos de Venezuela will be unable, in the short term, to return to its pre-strike status as the fifth-largest oil exporter in the world. Most of the recent production has come from the fields that were the easiest to restart, leading independent analysts to predict that Venezuela will, at best, produce 2.3 million barrels daily by the end of this year. The government is already preparing for the worst. The 2003 budget for the oil company was cut by $2.7 billion, to about $6 billion, while the income the government draws from oil is forecast by UBS Warburg to fall from $11.5 billion in 2002 to as little as $5 billion this year. The sharp drop will make it especially difficult to raise the $5 billion the company would have spent to keep production steady. Ali Rodriguez, the former leftist guerrilla who is now president of Petroleos de Venezuela, does not gloss over the obstacles. But in an interview, Rodriguez said the doomsday predictions had originated from dissident executives who hoped to undermine international confidence in the oil company and thereby weaken Chavez. He predicted that through sharp budget and personnel cuts, the company would reach 3.1 million barrels a day. And "with its resources," he said, "it is perfectly possible that it will even surpass that level." But analysts still warn that the company will be debilitated for years by the loss of many experienced workers. Those employees - executives, office workers, engineers and highly trained technicians - joined the walkout and, in some cases, damaged computers and software and stole files to hinder reactivation efforts.