www.planetark.org

SOUTH KOREA: February 27, 2003

SEOUL - Power generator Korea Southern Power Co Ltd expects delivery of a power fuel orimulsion from Venezuela to resume in March, after delays due to strikes in the Latin American country, a company source said yesterday.

The power generator, wholly-owned by state-run power monopoly Korea Electric Power Corp (KEPCO) (15760.KS), bought 25,000 tonnes of orimulsion in January from Venezuela under a spot contract, the first of its type in country, and planned to keep importing the fuel throughout the year. It was directly burned at Korea Southern's Youngnam thermal power plant.

But the delivery was halted from February due to an anti-government strike aimed at forcing Venezuelan President Hugo Chavez to step down.

"We will be able to see orimulsion delivered in March as they (Bitor) told us production would return to normal by the end of February, and they could make the delivery in March," a company source who asked not to be identified told Reuters.

OFFICIALS TP VISIT BITOR

Orimulsion, a mixture of 70 percent extra heavy crude oil and 30 percent water, is produced in Venezuela and used for direct burning at power plants.

He said Bitor, an affiliate of Venezuela's state oil firm PDVSA, would later notify them of details of the March amount.

Officials of the KEPCO unit plan to visit Bitor next month to resume talks for a one-year term contract for 2004 and hope to have term contracts over the following years after 2004, the official said.

Korea Southern has enough capacity to use up to 600,000 tonnes of orimulsion a year.

The first deal for orimulsion imports came amid a shortage of liquefied natural gas (LNG) in South Korea which stemmed from strong demand due to colder winter.

There has also been strong demand for oil from Japan, where shutdowns of nuclear power plants for safety checks have prompted higher demand for those fossil fuels.

State trader Chinaoil said yesterday it loaded early this week, about 150,000 tonnes of orimulsion from Venezuela after two months of delays due to the strike, which crippled oil exports from the world's number five oil exporter.

www.bayarea.com Posted on Wed, Feb. 26, 2003 By Juan Forero NEW YORK TIMES

CARACAS, Venezuela - 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, pondering how to function with 40 percent fewer workers.

Oil, the lifeblood of Venezuela, is flowing again after a paralyzing two-month national strike, with production 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 churn out 3.1 million barrels daily, matching the prestrike 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 picture hides 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 multinationals.

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 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 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 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 reach prestrike production levels, when Venezuela was 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 would 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 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."

To be sure, the Petroleos de Venezuela now emerging will be a far different company, in both its management and philosophy.

Gone will be the highly autonomous octopus that Rodriguez said functioned with great independence from the state, controlling revenues and influencing oil policies. The new company, taking advantage of some of the world's largest oil deposits outside the Middle East, "must give maximum contribution to the nonpetroleum sector, which is the majority of the people," Rodriguez said.

Still, even inside the gleaming office tower in Caracas where the company is based, the short-term outlook seems dismal as managers pore over financial statements.

"There is no investment, so there is no doubt that the company at this moment is very debilitated," Bernard Mommer, a close adviser to Rodriguez who is helping guide the restructuring, said in an interview. "Up ahead, we are going to have problems like how to recover the quality of the company."

Venezuela will benefit little from the higher world oil prices projected in coming months, since production capacity remains limited. By the time Petroleos de Venezuela is producing close to 3 million barrels daily -- if it ever does -- prices are likely to have stabilized, analysts say.

In the meantime, Rodriguez and his managers are busy splitting the company into three divisions: a natural gas branch that would develop the largest deposits in Latin America, and companies in the east and west intended to make obsolete the executive offices in Caracas, where antigovernment activities percolated.

Venezuela may also unload foreign assets, like refineries in the United States that operate under the Citgo chain, which is wholly owned by Petroleos de Venezuela, and other installations in Europe and the Caribbean.

Publicly, officials deny the companies are for sale. But Mommer said Citgo remained overly expensive while providing scant returns.

"The sophisticated part of our business, refining, that's not our business," Mommer said. "Exploration and production, that is where the big money is."

Such a sale would "dismember" the company, warned Jose Toro Hardy, an influential former board member, because Citgo refineries are specially outfitted to process Venezuela's particularly gummy brand of heavy crude.

"There are few refineries in the world that can refine" this crude, Toro Hardy explained. "Without Citgo, Venezuela's heavy oil would lose value."

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 will not 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 crucial commercialization department, which 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.nytimes.com February 26, 2003 By JUAN FORERO

CARACAS, Venezuela — Once more, tankers are setting sail loaded with crude bound for the United States, while government planners busily rebuild and reorganize the state-owned Petróleos de Venezuela, pondering how to function with 40 percent fewer workers.

Oil, the lifeblood of Venezuela, is running again after a paralyzing national strike, with production now topping two 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 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 picture hides 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 multinationals.

Petróleos 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 Chávez'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 al-Shereidah, an oil economist in Caracas who helped write oil regulations for the Chávez 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 a possible war with oil-rich Iraq promises to batter energy markets.

The obstacles are daunting after the strike, which started to fizzle in February after two months. 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 Mr. Chávez'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 in 2003, with Venezuela facing "a fiscal crisis of major proportions." Fitch Ratings says 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, combined with the financial straits, means that Petróleos de Venezuela will be unable, in the short term, to reach production levels of the prestrike days, when Venezuela was 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 year-end.

"We believe the company's role in Venezuela society has been permanently altered," a recent Deutsche Bank report said. Assuming average daily production of 1.7 million barrels for 2003, the bank estimated that oil revenue would 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 in 2003. The drop will make it especially difficult to raise the $5 billion the company would have spent to keep production steady.

Alí Rodríguez, the former leftist guerrilla turned president of Petróleos de Venezuela, does not gloss over the obstacles. But in an interview, Mr. Rodríguez said the doomsday predictions originated with dissident executives who hoped to undermine international confidence in the oil company to weaken Mr. Chávez.

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."

To be sure, the Petróleos de Venezuela now emerging will be a far different company, in both its management and philosophy.

Gone will be the highly autonomous octopus that Mr. Rodríguez said functioned with great independence from the state, controlling revenues and influencing oil policies. The new company, taking advantage of some of the world's largest oil deposits outside the Middle East, "must give maximum contribution to the nonpetroleum sector, which is the majority of the people," Mr. Rodríguez said.

Still, even inside the gleaming office tower in Caracas where the company is based, the short-term outlook seems dismal as managers pore over financial statements.

"There is no investment, so there is no doubt that the company at this moment is very debilitated," Bernard Mommer, a close adviser to Mr. Rodríguez who is helping guide the restructuring, said in an interview. "Up ahead, we are going to have problems like how to recover the quality of the company."

Venezuela will benefit little from the higher world oil prices projected in coming months, since production capacity remains limited. By the time Petróleos de Venezuela is producing close to three million barrels daily — if it ever does — prices are likely to have stabilized, analysts say.

In the meantime, Mr. Rodríguez and his managers are busy splitting the company into three divisions: a natural gas branch to develop the largest deposits in Latin America, and companies in the east and west intended to make obsolete the executive offices in Caracas, where antigovernment activities percolated.

Venezuela may also unload foreign assets, like refineries in the United States that operate under the Citgo chain, which is wholly owned by Petróleos de Venezuela, and other installations in Europe and the Caribbean.

Publicly, officials deny the companies are for sale. But Mr. Mommer said Citgo remained overly expensive while providing scant returns.

"The sophisticated part of our business, refining, that's not our business," Mr. Mommer said. "Exploration and production, that is where the big money is."

Such a sale would "dismember" the company, warned José Toro Hardy, an influential former board member, because Citgo refineries are specially outfitted to process Venezuela's particularly gummy brand of heavy crude.

"There are few refineries in the world that can refine" this crude, Mr. Toro Hardy explained. "Without Citgo, Venezuela's heavy oil would lose value."

Oil analysts also warn that the company will be debilitated for years from the loss of experienced workers. 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.

Mr. Chávez, who has referred to the employees as traitors and fascists, has promised that they will not 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 crucial commercialization department, which 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."

sg.biz.yahoo.com Wednesday February 26, 12:01 AM

CARACAS (Dow Jones)--Venezuela's Oil Minister and the company president of state-owned oil monopoly Petroleos de Venezuela SA (E.PVZ) are due to travel to Washington Tuesday and are likely to meet U.S. Secretary of Energy Spencer Abraham Wednesday, a spokesman of state-owned oil monopoly Petroleos de Venezuela said Tuesday.

Oil Minister Rafael Ramirez and PdVSA President Ali Rodriguez want to make clear to the U.S. government that the oil sector is returning to normal and that the country can play a role if an oil supply shortage were to occur due to a war between the U.S. and Iraq, the spokesman added.

ADVERTISEMENTA definite meeting with Abraham for Wednesday hasn't been set yet, the spokesman said. An official at the Venezuelan Embassy in Washington said the Venezuelan ambassador Bernardo Alvarez is still working on the final agenda.

Venezuela's oil industry is slowly recovering from a devastating oil strike that crippled the company and resulted in a loss in revenue of around $4 billion. A nationwide strike, which started Dec. 2, was aimed at forcing the resignation of President Hugo Chavez. About 35,000 oil workers joined the strike.

Under normal circumstances, Venezuela is among the top four suppliers of crude oil and refined products to the U.S.

Although oil production and exports have been creeping up, they are about 50% of the pre-strike production level of around 3 million barrels per day.

As of Tuesday, the government has dismissed 15,636 workers since the strike began.

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

boston.com By Associated Press, 2/25/2003 16:37

CARACAS, Venezuela (AP) In another sign that Venezuela's oil industry is recovering from a strike, the oil minister said Venezuela was lifting a suspension on some production and export contracts.

Petroleos de Venezuela SA invoked a contract provision three days after an oil workers strike began Dec. 2 that temporarily released it and its clients from contractual obligations.

The provision has been lifted on production and export of three types of Venezuelan crude as well as liquified petroleum gas, Oil Minister Rafael Ramirez said Tuesday.

Some 35,000 of 40,000 PDVSA workers joined a general strike intended to oust President Hugo Chavez. The strike failed and was called off Feb. 4, though oil workers stayed off the job. The government has fired more than 15,000 strikers at PDVSA.

PDVSA President Ali Rodriguez says production now stands at 2.02 million barrels per day, compared to a pre-strike figure of 3.2 million barrels per day. Dissident staff say output is closer to 1.5 million barrels per day.

Before the strike, Venezuela was the globe's fifth-largest oil exporter and a top supplier to the United States.

Ramirez and Rodriguez were traveling to Washington to convince U.S. officials that oil company operations are almost back to normal.