asia.reuters.com Fri January 24, 2003 06:01 AM ET

NEW YORK (Reuters) - Citgo Petroleum Corp.'s president said the company would cut capital spending, delay a $250 million public offering and reduce inventories to minimum levels this year, the Wall Street Journal reported on Friday.

He said the company is taking the measures to boost cash flow that has been hurt by the seven-week work stoppage by Venezuelan oil workers, according to the article. In a letter to employees, President Oswaldo Contreras said Citgo, would shut down the Lake Charles, La., Conversion Optimization Project and a mixed distillate hydrotreater project at its Corpus Christi, Texas refinery, the report said.

He said the company would also defer several large maintenance turnarounds scheduled at its refineries and reduce product inventories to "minimum working levels," but that it feels it "can continue to keep our customers supplied with the products they need," according to the newspaper.

Contreras will also cut the number of corporate airplanes to one, the article said. Citgo owns one plane and leases one.

Credit-rating downgrades and the slowdown in crude-oil supplies from Venezuela had raised the company's cost to do business, the Journal quoted Contreras as saying, as it bought additional volumes of crude in the open market to keep its plants running, paid more for the oil and received less-favorable payment terms.

Citgo, a wholly-owned subsidiary of Petroleos de Venezuela SA (PDVSA), said in a filing with the U.S. Securities and Exchange Commission on Tuesday it expects to receive crude oil deliveries this month from PDVSA that will equal about 83 percent of the volume it received in January 2002.

Citgo was not immediately available for comment early on Friday morning.

vh80299.vh8.infi.net John Sullivan January 23, 2003   LAFAYETTE — Rig use in the Gulf of Mexico has declined for a third consecutive week while the possibility of a war in the Middle East is keeping oil above $32 a barrel on world markets.

“The market is very volatile now,” said Patrick Burke, an investment representative with the New Iberia office of Edward Jones. “War fear is the driving force behind high prices now, and the strike in Venezuela is also adding to that figure.”

Venezuela was the fifth-largest exporter of oil in the world, before the almost six-week strike that has paralyzed the nation. Before the strike, Venezuela was exporting about 2 million barrels of oil per day. Currently, Venezuela exports less than 200,000 barrels of oil per day.

The price of crude for March delivery closed Wednesday at $32.85, down 34 cents from the opening bell. On Tuesday, it closed at $34.61, the highest closing price since Nov. 30, 2000, when it closed at $33.82.

While the price of oil continued to swing back and forth, the number of mobile offshore drilling rigs in the Gulf of Mexico dropped by three rigs to 122, according to Tom Marsh, associate publisher of the ODS-PetroData weekly rig report.

“Rig utilization in the Gulf of Mexico is at 65.6 percent,” Marsh said Wednesday. “The world fleet held steady this week with 523 rigs under contract out of a total of 656 rigs.”

The high price of oil on the world market is having an effect on exploration and production in the Gulf of Mexico, Burke said. As long as oil prices remain high, companies will continue to cut their spending, and that means less drilling exploration, Burke said. That directly affects oil service support and drilling companies.

As the possibility of war between the United States and Iraq nears, Burke said he believes oil could jump above the $35-a-barrel mark and stay there for the short term.

A short war, Burke said, and prices should settle down to the normal range of $22 to $28 a barrel. A prolonged war could see oil stay at inflated prices, which could stop more oil drilling and exploration in the Gulf of Mexico.

“Venezuela and Iraq are the two wild cards now,” he said. “Everyone in the industry is watching to see what will happen next.”

www.dailyfreeman.com By Jonathan Ment, Freeman staff January 23, 2003

THERE'S GOOD news for people feeling the combined sting of bitter cold temperatures and high heating costs: The federal government may increase funding for its energy assistance program, and meteorologists think temperatures might climb by early next week - all the way to the freezing mark. The U.S. Senate on Tuesday voted to provide almost $300 million in additional funding for the Low-Income Home Energy Assistance Program, which provides states with grants to help households in need with winter heating costs.

The Senate wants to raise the HEAP budget from $1.7 billion to $2 billion. The House has approved a $1.7 billion package, so the two sides will have to work out a compromise.

THE EXTRA money is needed in New York, where this winter is colder than last yet HEAP funding is down.

"We're operating based on the projection of $191 million," said Michael Hayes, a spokesman for the state Office of Temporary and Disability Assistance, which administers the program in New York. "Last year, we received $212 million."

Hayes said the New York program is going through available funds more quickly that it did a year ago, but because fewer households are being served this year, the situation is not yet critical.

"We've served 572,000 households (so far this year)," Hayes said. "Last year, we served 658,000 for the entire year. "We think we have enough (money) to run through February."

Of the 658,000 households served last winter, 13,000 were in Ulster, Dutchess, Greene and Columbia counties.

GLENN Decker, commissioner of the Ulster County Department of Social Services, said his office is getting a steady stream of requests for HEAP money.

"People hear about it by word of mouth and come in," he said. "We did 30 (on Tuesday. We could probably have 100 applicants between walk-ins and phone calls.

"We're (also) finding the (fuel) dealers are backed up on their service calls," Decker said. "It puts a strain on the whole system. I just heard that one of our employees has been without heat for three days. Their oil company can't get the parts to repair their furnace."

BARRY Motzkin, vice president and general manager of the Kingston Oil Supply Co., said the region was "due for a real winter, and (KOSCO was) prepared for it."

Other factors weighing on oil prices, Motzkin said, are the labor problems in Venezuela, a key oil-producing nation; and the possibility of the United States waging war against Iraq, which sits in the heart of the oil-rich Middle East.

KOSCO was charging $1.499 per gallon of home heating oil on Wednesday, though people who use the company's "price protection plan" pay $1.099, which is less than last year.

"Price protection plans level out volatility in the market, which is what they're supposed to do," said Motzkin, who also is a spokesman for the Hudson Valley Oil Heat Council.

AS FOR Mother Nature's role, temperatures this winter have been about 15 percent colder than last year, which was one of the warmest on record.

"It's so cold right now, it's hard to think that it's ever going to get warm again," Hayes said. "But should the demand decrease, we (HEAP's resources) could go longer."

Hugh Johnson, a meteorologist with the National Weather Service in Albany, said unlike recent years, when the Mid-Hudson's low temperatures never dropped below zero, "we've had our fifth day below zero in the past week."

And today may be the coldest day yet, with a high temperature of only 15 degrees.

But relief may be in sight: The Weather Service is predicting highs near 30 on Monday, Tuesday and Wednesday, with lows only in the teens.

DECKER SAID Ulster County is taking care of all qualified people who need help with heating costs.

"If you tell me you're without (heat), we'll arrange for an emergency delivery," he said. "We will not allow anyone to go without heat. We will find a way."

Motzkin said oil customers can help delivery drivers by uncovering fill caps that are buried in the snow and clearing driveways.

"Cold we handle pretty well; snow is a variable," he said. "Trucks are wider than passenger vehicles, so making sure the driveway is clear and well-sanded is essential."

news.ft.com By Carola Hoyos in New York and Adrienne Roberts in London Published: January 22 2003 4:00 | Last Updated: January 22 2003 4:00

Refiners are facing the possibility of being forced to reduce their operations as US crude oil inventories reach historic lows.

Inventory data to be released tomorrow are expected to show that the US's commercial levels of crude oil have dropped below the 270m-barrel level at which the distribution system of pipelines and oil storage tanks begins to falter.

Even without technical difficulties, refiners faced with diminishing profit margins because of low crude oil supply and high levels of gasoline stocks are considering slowing their operations, possibly foreshadowing an expensive season for US motorists this summer.

George Beranek, manager of market analysis at PFC Energy, a Washington-based consulting firm, expects refiners to slow down operations because of the recent supply squeeze caused by the crisis in Venezuela. That has taken more than 70m barrels of crude oil out of the world market.

Citgo, which relies on Pdvsa, Venezuela's state oil company and Citgo's parent, for half its crude oil, has been hardest hit, as have refiners that process Venezuela's heavy crude oil and for whom lighter grades from other Opec countries are imperfect substitutes.

According to the International Energy Agency, the US is not the only region to suffer from falling oil inventories, with European and Pacific supplies also showing significant losses.

Although Venezuela's exports are slowly increasing and US refiners welcomed yesterday's news that oil tanker workers in western Venezuela were on the verge of going back to work, they warn that the interruption is far from over.

A breakthrough in Venezuela would be good news for George W. Bush, US president, who has come under increased pressure to release some of the 600m barrels of the country's strategic reserves to help cool oil prices.

They have recently flirted with two-year highs because of Venezuela's woes and the possibility of war with Iraq.

But the Bush administration is keen to hold on to as many of its own extra barrels as possible following Opec's decision at its meeting in Vienna earlier this month to dip into its additional production capacity, promising to increase production by up to 1.5m b/d.

John Felmy, chief economist at the American Petroleum Institute, an industry group, agrees, arguing that the US needs to "keep its powder dry".

That will be especially important if the US intends to go to war in Iraq.

Venezuela's outage has prompted US refiners to rely increasingly on Iraqi crude oil exports in the past two months, and Opec has already made clear that it would find it difficult to make up for a loss in production from both Venezuela and Iraq.

Public oil supplies - government-controlled oil at the EIA's disposal in an emergency - are about 1.28bn barrels. This includes about 595m barrels in the US strategic petroleum reserve.

The IEA, which controls strategic oil reserves for 26 industrialised countries, says public oil stocks would be enough to cope with a crisis the size of the 1978-1979 Iranian revolution. That was the largest disruption in history and, analysts say, the closest precedent to a combined Venezuelan/Iraqi outage.

vh80299.vh8.infi.net John Sullivan January 8, 2003 The Associated Press

An oil leak is seen Monday near a pump in Maracaibo Lake in western Maracaibo, Venezuela. According to members of the opposition in a news conference, new workers who were trying to resume oil production had an accident, resulting in the leakage.

LAFAYETTE - A spokesman for a Louisiana congressman said Tuesday the United States will not tap into its energy savings. The administration is instead hedging its reserves in the event of a war in the Middle East.

Last week, U.S. Rep. Billy Tauzin, R-Chackbay, had requested the U.S. Department of Energy open the Strategic Oil Reserves to offset the loss of oil coming from Venezuela.

Venezuela is the fifth-largest producer of oil in the world, and during 2002, the country imported an average of 1.2 million barrels of oil in the United States each day.

"The administration is caught between a rock and a hard place right now," said Ken Johnson, a spokesman for Tauzin. "On one hand, the White House wants to do whatever is necessary to keep the price of gasoline down for consumers.

"On the other hand, though, they want to keep their reserves in the event of a war with Iraq and the Middle East oil lines are disrupted."

With the loss of oil to American refineries because of the Venezuelan shutdown, Tauzin had requested the Department of Energy open the strategic reserves.

"The administration has continued to assure us that they are monitoring the market," Johnson said. "The congressman has continued to say he is worried that the continuing shortage will eventually begin hurting consumers in the form of higher prices at the gas pumps."

Tauzin had requested the Strategic Petroleum Reserves be tapped because the stoppage of oil coming from Venezuela has affected five refineries in the United States.

The refineries are: Citgo in Lake Charles; Murphy Oil in Meraux; Exxon Mobile in Chalmette; the Lyondell-Citgo Refining joint venture near Houston; and the Farmland Industries refinery near Coffeyville, Kan.

"None of these refineries have reported they are going to stop operations," Johnson said. "But all have indicated they are scaling back."

He said a large shipment of oil from Russia has been delivered to the Lake Charles refinery, which boosted its inventory up. Russian officials have said they will continue to increase

"The wild card will be what happens in the Middle East," Johnson said. "If the United States goes to war and the oil lines from the Mideast are cut, then the president has the reserves to fall back on."

He said that the Strategic Petroleum Reserves are similar to a savings account.

"It's obvious the administration is using the reserves as a rainy day fund," Johnson said. "Use them too early and a major disruption of the oil fields and oil supply happens, then we won't have the reserves and we will see severe shortages."

The Strategic Petroleum Reserves consists of four large underground storage sites in Louisiana and Texas that contain about 570 million barrels of oil. In Louisiana, the sites are at West Hackberry near Lake Charles and Bayou Choctaw near Baton Rouge.

The two Texas sites are Bryan Mound near Freeport and Big Hill near Winnie.

The Strategic Petroleum Reserves were ordered developed after the Arab Oil Embargo of the United States in the late 1970s because of the nation's support of Israel.