Venezuela to Split State's Oil Monopoly - Replacement workers damaging equipment

CARACAS, Venezuela - President Hugo Chavez, battling a strike that has paralyzed the world's fifth-biggest oil exporter, will restructure the state oil company to tighten government control and eliminate dissent, the energy minister said.

In a nationally televised speech, Energy Minister Rafael Ramirez said the Caracas headquarters of Petroleos de Venezuela S.A. would be mostly dismantled. The company's administration would be moved to two centers of operation in eastern and western Venezuela.

Ramirez didn't say how many of the 7,000 workers at the headquarters will lose their jobs, but most are currently on strike. The government says it will fire strikers - some 35,000 are off the job - and already has dismissed high-ranking executives.

Ramirez, who told reporters last week of the plan to split the company, said a new board "with a more strategic vision" will soon be appointed. The company will focus more on production of crude, gas and refining, he said.

Chavez long has said he wanted to restructure the company, which he has called a "state within a state" run by privileged executives. Chavez wants to increase government revenues from the company.

"We need a PDVSA much more efficient ... and not as an oil enclave, but a company at the service of the nation," Ramirez said. Bureaucracy in Caracas increases operating costs by $1 billion a year, he added.

Venezuela's largest labor confederation, its biggest business chamber and opposition political parties began the strike Dec. 2 to pressure Chavez into resigning or accepting an early vote on his rule. The president has refused to do either.

The strike has been most effective in Venezuela's oil industry, which provides half of government income and 80 percent of export revenue. Venezuela is a top supplier of crude to the United States, and the strike has helped send international oil prices above $30.

Company activity is seen as gradually picking up but is still well below normal. Crude output is estimated at around 400,000 barrels per day, compared to the pre-strike level of 3 million barrels a day. Exports, normally 2.5 million barrels a day, are at 500,000 barrels a day.

Chavez has named company managers Felix Rodriguez and Luis Marin to run operations in the east and west.

Last spring, Petroleos de Venezuela executives went on strike to protest board appointments by Chavez they said were politically motivated. Venezuela's opposition joined the strike.

Nineteen people were killed in an April 11 protest march, and dissident military officers ousted Chavez April 12. Chavez was restored by loyalist troops April 14 after an interim government dissolved the constitution, triggering a popular rebellion by his supporters.

Chavez on Tuesday accused strike leaders of hurting Venezuela's majority poor by throwing the economy into chaos and threatening to stop paying taxes.

"We are starting the year with many economic difficulties," he said. "Now, a group of treacherous Venezuelans is calling for tax evasion."

Chavez spoke at a public school in Catia, one of the poorest districts in Caracas. The visit was intended to show public schools were ignoring the strike.

Tens of thousands of people marched on the offices of the federal tax agency to support a tax boycott.

The government may have to cut the $25 billion 2003 budget by up to 10 percent, Finance Minister Tobias Nobrega said. Taxes were supposed to pay for a third of the budget. Oil exports were supposed to pay for half.

Smoke billows behind an oil refinery in El Palito, appoximately 150 miles West of Caracas, January 7, 2003. Workers trying to restart Venezuela's 130,000 barrel per day El Palito refinery, shut by a 37-day strike by foes of Venezuelan President Hugo Chavez, have damaged a seal in one of the vacum units. 'The products have to be drained from the vacum unit of the plant and they have to be burned', Pedro Jimenez, the plant's logistics manager said. REUTERS/Str

An oil leak near western Maracaibo, Venezuela, is seen Tuesday, Jan. 7, 2003. According to members of the opposition in a news conference Monday, new workers who were trying to resume oil production had an accident, resulting in the leakage. (AP Photo/Ana Maria Otero)

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Chavez spoke at a public school in Catia, one of the poorest districts in Caracas. The visit was intended to show public schools were ignoring the strike.

Venezuelan President Hugo Chavez, left, greets the students of a new school in an impoverished neighborhood in Caracas, Venezuela, Tuesday, Jan. 7, 2003. Also seen is Education Minister Aristobulo Isturiz at right. (AP Photo/Feliciano Sequera, Miraflores/HO)

July 1, 2001 - More Cuban Trainers in Venezuela (Chavez and Cuba have taken control of Venezulan schools)***A new constitution written by Chávez supporters requires all schools to teach ``Bolivarian principles'' ---- a code phrase for Chávez's brand of leftist populism ---- and the pro-Chávez majority in the legislative National Assembly is preparing a bill laying out the exact curriculum.

Last month, the president issued Decree 1011, creating a corps of ``itinerant inspectors'' empowered to close schools and fire teachers that don't follow government-setprocedures and standards. ``Political commissars,'' Agudo called them. Jaime Manzo, head of the national teachers' union, called it ``a sword hanging over the head of any teacher who refuses to sing Chávez's praises in the classroom.''

Parents' groups and the teachers' union have appealed to the Supreme Court to block the decree and submitted to the assembly an alternate education reform plan that guarantees a ``pluralist education'' and bans ``partisan politics'' from the classroom. New history texts for fourth- and sixth-graders published in 1999 praised Chávez's coup attempt and branded as ``corrupt oligarchies'' the two parties that ruled Venezuela since the late 1950s, Democratic Action and COPEI.

Chávez has also greatly expanded a system of paramilitary classes in public high schools that had long been on the books but were seldom held, portraying them as ``the founding stones of the new Venezuelan man.'' ``He is promoting militarism, infecting texts with viruses that foster class hatreds ... and speak against globalization and privatization,'' Raffalli said in an interview.

Chávez recently signed a deal with Cuba under which Havana will train Venezuelan teachers and provide educational materials, and Education Minister Hector Navarro last year approved a nationwide essay competition on the life of Argentine-born Cuban revolutionary Ernesto ``Ché'' Guevara.***

Hugo Chavez - Venezuela

REPORT ON VENEZUELA*** Fuel: Gasoline stored in the Paraguana complex (Cardon and Amuay refineries, the world's largest) might grant 20 days supply of national consumption (around 40 Mm barrels), at the same time, this inventory does not allow the refineries to operate for lack of additional storage capacity. One tanker was partially loaded by the end of the week with some difficulty due to shortage of qualified manpower. It is a well-known fact that the complexity of these refineries makes them not available for production in the short term.

The El Palito refinery was positioned as a symbolic figure and the Government is focusing all efforts and manpower into its start up, however there are several difficulties to overcome in order to succeed.

PDVSA refineries located abroad: Isla in Curaçao, closed operations December 29th, and will require at least 15 days to get restarted. St. Croix refinery is in full operation.

Gasoline distribution seems to worsen the problem on a daily basis. There are difficulties in the Andean region, gasoline is being smuggled from Colombia and sold at 14 times its current price in Venezuela. Caracas is being served from the Guatire reservoir, yet this terminal and its pipelines were contaminated when at the peak of the crisis, the Government pumped more than 200.000 barrels of Catalytic Nafta in order to pump out the gasoline inside the pipes. There is an existing black market in major metropolitan areas selling gas at $1 per liter (v. standard market price of $0.06 per liter) and the danger of accidental death due improper gasoline storage in jerry-cans has already occured.

This last weekend clean gasoline was pumped in again without purging the pipelines. The resulting mixture of gasoline and nafta will be distributed with the high risk of engine damage. (Explosion grade of gasoline is lower than nafta - nafta is a primary derivative of crude refining, needing additional refining plus the addition of derivatives to obtain gasoline. Additionally, the usual quality control of gasoline is not being conducted, and damage to vehicles is expected to happen). The Central region, Maracaibo, Oriente and Guayana areas are being hit the hardest by the fuel shortage.

It is noteworthy that only around 40% of available tank trucks are operating, most of them in an illegal manner, since they were confiscated "de facto" by government supporters. The available fuel, in no manner, covers distribution needs.

Crude Exports: For reference, please note that regularly, around 240 to 260 vessels are used to move oil exports from Venezuela. During the current strike, only 6 have been dispatched (carrying around 4.5 mm barrels). There are 27 vessels in the bay, an additional 17 have refused to enter Venezuelan ports and 4 are either loading or unloading (Vessels positioned in non operating terminals: Puerto La Cruz B/7 O/2, Jose B/1, Criogenico B/1, Puerto Cabello B/2, Cardon B/3, Amuay B/6, Tacoa O/1 Catia la Mar B/1, Carenero O/1, Bitor and Petrozuata none, Bajo Grande B/1, El Palito B/1 - B: moored in bay, O: in operation, None no vessel in port). It is noteworthy that PDVSA's own ships carried 90% of the operation and these are being operated under armed military supervision, which adds danger to the critical operation.

Operations - production and refining facilities are closed in all the Oriente Areas and also in Tia Juana, Paraguana and El Palito. Petrochemical plans are also closed. All facilities, nationwide are under military control.***

OPEC may open up spigots to allay strike, war concerns - [Full Text] LONDON -- Hoping to ease fears of a possible oil shortage, OPEC representatives plan an emergency meeting this weekend to discuss boosting the cartel's crude production by up to 2 million barrels a day, or 8.7 percent, an OPEC official said Tuesday. Oil prices, which are about 45 percent higher than they were a year ago, have surged in recent weeks on concerns about deepening turmoil in Venezuela and a possible war against Iraq, two key members of the Organization of the Petroleum Exporting Countries.

A hike in production would represent an abrupt reversal in OPEC policy. OPEC's 11 members decided less than a month ago to slash output by up to 1.7 million barrels a day in the hope of preventing a price decline when seasonal demand dips this spring. But oil industry analysts and traders pointed out that any additional oil exported by OPEC would not reach the United States soon. As a result, they said they expected the price of oil in the United States to remain above $30 a barrel. Those high prices, in turn, have pushed up retail prices of gasoline, heating oil and jet fuel.

Ministers of each member country except Algeria have agreed to meet Sunday at the group's headquarters in Vienna, Austria, the official said. Since OPEC's Dec. 12 decision to cut production, worrisome signs of a potential shortage have begun to appear. Oil shipments from Venezuela, normally OPEC's third-largest producer, have dwindled by 80 percent because of a month-old strike aimed at forcing the country's president, Hugo Chavez, from office. A U.S.-led attack on Iraq would halt exports from that country, which has the world's second-biggest crude reserves after Saudi Arabia.

OPEC officials have said the group cannot pump enough additional crude to make up for a simultaneous loss of exports from Venezuela and Iraq, which together have historically exported roughly 4 million barrels a day. OPEC's remaining members have spare production capacity of 3.3 million barrels a day, according to the Paris-based International Energy Agency, the West's energy watchdog. Saudi Arabia, OPEC's most influential member, has proposed that the group raise output by 1.5 million barrels a day.

Crude prices slipped after news of OPEC's discussions. In New York, the price of light, sweet crude for February delivery tumbled $1.02 to $31.08 a barrel. February contracts of North Sea Brent crude fell 87 cents a barrel to $29.33 in London. February heating oil futures shed 3.91 cents to close at 84.88 cents a gallon, while February gasoline lost 4.02 cents to settle at 84.18 cents a gallon. Natural gas for February delivery gained 19.2 cents to settle at $5.127 per thousand cubic feet. [End]

Bush:U.S. oil reserves locked up tight - Chavez: claims role of "oil commander"

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