Reuters, 06.10.03, 4:52 PM ET By Matthew Robinson CARACAS, Venezuela, (Reuters) - The Venezuelan government's desperate scramble to restart oil production after a crippling two-month strike in December and January could damage the OPEC nation's long-term crude output capacity, industry experts said. State oil company Petroleos de Venezuela, also known by its Spanish acronym PDVSA, fired around 18,000 employees for joining the anti-government strike. The company used troops and replacement workers to restore output to around 2.8 million barrels per day (bpd) by April -- just three months after the strike cut production to below 50,000 bpd. But that hurried restoration may cost PDVSA capacity by the end of 2003 or early 2004. Some western heavy oil fields might not be restarted, forcing PDVSA to pump more from reactivated fields and potentially causing well damage, analysts said. "It would not be surprising to see a fall in Venezuelan capacity, given the complex nature of its reservoirs. After every revolutionary change (in oil-producing countries), we've seen a fall in production," said one analyst with a U.S. oil company, who spoke on condition of anonymity. Without the fired PDVSA staff, who sought to force leftist President Hugo Chavez from office, the state company also lacks expertise to counter common wellhead problems like water encroachment, which can cause capacity losses, experts said. "They did what an oil company would have to do. They got the oil pumping again," an oil-service company official said. "But the best-qualified people are gone and they are short of people who do reservoir planning and management. Without incremental (capacity) increases, it will be difficult to maintain output," he added. Analysts said PDVSA would have trouble countering normal oil capacity depletion rates for Venezuela of around 25 percent per year because losses from the strike forced the company to drastically slash its exploration and production budget. PDVSA's 2003 budget has yet to be finalized. PDVSA President Ali Rodriguez last month gave an optimistic assessment of the company's wellhead management and said some wells were producing better than before the strike. But ex-PDVSA managers say wellhead problems could cause a drop in overall capacity by the end of this year, especially in hundreds of smaller, older oil wells in the west.

SQUEEZING WELLS PDVSA may have to compensate for sliding output at mismanaged fields by squeezing other fields harder and so risk eroding capacity of the world's No. 5 oil exporter to maintain output at current levels. "Venezuela has a theoretical sustainable production capacity of 3.9 million bpd. But that number has never been tested. If their real capacity is higher than that, it buys them some time," said an official with a U.S. company, who also spoke on condition of anonymity. Some analysts have said capacity has already fallen under 3.9 million bpd due to under-investment and strike-related damage. They estimate production well below levels claimed by PDVSA. The government claims oil production has been restored to pre-strike levels of 3.1 million bpd. Analysts and local companies say Venezuela briefly touched production of 3 million bpd after the strike before settling around 200,000 bpd lower. PDVSA has also built up a storage cushion of around 27 million barrels this year, which it can draw down to supply customers. Help in stemming capacity declines could come from foreign companies as PDVSA seeks to increase private participation in the oil sector to compensate for lack of internal investment.

<a href=www.vheadline.com>venezuela's Electronic news Posted: Thursday, May 22, 2003 By: Jose Gabriel Angarita

VenAmCham's Jose Gabriel Angarita (economist) writes: The Organization of Oil Exporting Countries (OPEC) agreed to increase quotas and reduce production in an attempt to put an end to an estimated 2 million bpd glut on the world oil market. The cartel may be trying to keep the markets supplies, given the seasonal impact on oil demand ... but idle capacity among its member countries is estimated at about 1.2 million bpd, meaning that not much in the way of price variation can be anticipated, in the short run at least.

The expectations generated at the beginning of the year due to the impending military conflict have not materialized, since oil prices have remained high and are not in question. The cause may be the slow return of Iraqi production (output for domestic consumption is estimated at 143,000 bpd), terrorist attacks in the Middle East (the region that supplies about a third of world oil exports), and fears of new terrorist attacks in the United States.

For Venezuela, according to statistics published by Banco Mercantil, April saw a recovery of production to an average of 2.6 million bpd, though the average for the first four months of the year was 1.7 million barrels per day. The price of Venezuela's oil export basket has averaged US$27.14 per barrel so far in 2003, but it has sunk to about $21 per barrel since the end of the Iraq war.

Oil prices will continue to be influenced by the fluctuations of world supply and demand and by the slow recovery of Iraqi production, the recovery of the Venezuelan oil industry, and the Nigerian elections, as well as declines of international inventory levels.

The best thing for Venezuela right now is the maintenance of a certain stability in the world, since lower oil prices would worsen the country's fiscal crisis by reducing revenue from oil exports.

Reuters, 05.20.03, 12:16 PM ET

NEW YORK, May 20 (Reuters) - Super Octanos, the only plant in Venezuela that makes MTBE, an additive essential for production of cleaner-burning gasoline, lifted a force majeure on Monday and expects to ship cargoes of the product by the end of the month, a source with knowledge of the operations said on Tuesday.

The force majeure was put in place on April 26 after a explosion at the plant, the source told Reuters.

Super Octanos is located in Jose and is a joint venture between Ecofuel, a subsidiary of Italian oil and gas major Eni <ENI.MI> and Pequiven, a subsidiary of Venezuelan state-owned oil company Petroleos de Venezuela (PDVSA).

<a href=reuters.com>Reuters Thu May 15, 2003 01:42 PM ET (The following statement was released by the ratings agency)

NEW YORK, May 15 - Increasing crude oil production and elevated oil prices have strengthened the financial position of the government of Venezuela and its national oil company, Petroleos de Venezuela S.A. (PDVSA), and directly or indirectly led to several ratings actions, according to a report published today by Standard & Poor's Ratings Services.

In late 2002, the Venezuelan oil industry was paralyzed by prolonged labor disruptions that, to a large extent, represented a political insurrection against the administration of President Hugo Chavez. However, since January, momentum has favored the Chavez administration. Sympathy for striking workers dissipated as shortages of staples (i.e., gasoline and food) weighed on Venezuelans.

Perhaps the most important factor in reversing momentum has been the restoration of crude oil production. Since January, production has steadily increased, with estimated production levels now ranging to about 3.2 million bpd (according to reports by Venezuelan officials) from 2.6 million bpd (according to analyst consensus).

"The outlook on the ratings on all PDVSA-linked transactions now is stable, (excluding PDVSA Finance as structured finance ratings carry no outlook)," said Standard & Poor's credit analyst Bruce Schwartz. "However, our concerns about political conflict in Venezuela, which could reignite in the run-up to a possible referendum on the Chavez administration in August, the structural imbalances in the Venezuelan economy, and the potential for government finances to deteriorate are reflected in the relatively low ratings."

Also, according to the report, the ratings encompass risks associated with sustaining PDVSA's current output, which is likely to be challenged by fiscal constraints and the dismissal of about half of PDVSA's 35,000 workers.

The full report, "Petroleos de Venezuela, Units Cope With Political, Economic Challenges," is available on RatingsDirect, Standard & Poor's Web-based credit research and analysis system.

May 5, 2003, 10:36PM By MICHAEL DAVIS Houston Chronicle

Venezuela is back to its pre-strike oil production level, and now the national oil company says it plans to increase production 2 million barrels a day by 2008.

Officials from Petroleos de Venezuela SA, including Chief Executive Ali Rodriguez, were in Houston on Monday as part of a series of conferences the national oil company is holding aimed at restoring investor confidence following the devastating strikes that began in December and virtually shut down the Venezuelan oil industry for three months.

Many dispute the current production figures coming out of Venezuela. A Bloomberg Survey released Monday pegged the country's production at 2.59 million barrels per day, up 340,000 a day over March production.

Rodriguez challenged those estimates, saying oil production is back to 3.2 million barrels per day and said Venezuela has recently made some significant new discoveries including a giant field south of Lake Maracaibo that could hold as much as 1 billion barrels.

The goal of the strikes was to oust President Hugo Chavez, but he remains in office. Strikers tried to use oil as a political weapon, something that had never been done before in a country that garners a majority of its revenues from oil.

Rodriguez referred to the strikers as people who abandoned the company and country. Some 18,000 PDVSA strikers were fired.

"The crisis we endured in late 2002 and early 2003 was not only unusual but also unprecedented in the history of the Venezuelan oil industry," Rodriguez said at a news conference.

Restarting the nation's oil industry was a "daunting task," Rodriguez said. The company used retirees and volunteers to replace workers who left their jobs. The military was used to prevent sabotage and keep order.

OPEC quotas will likely rise as demand increases, meaning Venezuela will not find itself at odds with other OPEC members as it increases its production to a desired 5.1 million barrels per day over the next five years, he said.

Most OPEC countries are producing as much oil as their infrastructure can support. Venezuela is one of six cartel countries that can expand production capacity, Rodriguez said.

Of the $43 billion the country expects to spend over the next five years to increase its production, 46 percent of that will come from the national and international private sector, Rodriguez said.

The country is preparing to offer some offshore blocks for natural gas exploration, a large element of the company's new business plan. Venezuela has an estimated 148 trillion cubic feet of natural gas. It plans to begin exporting liquefied natural gas to the United States once processing facilities are complete.

Five offshore natural gas blocks have been identified so far, two of which have been awarded to Statoil and ChevronTexaco. The other three blocks will likely be offered later this year, officials said.