Venezuela's PDVSA Cuts Oil Output Costs, Drilling

July 13, 2003

CARACAS, Venezuela, (Reuters) - Venezuela's slimmed-down state oil company PDVSA, which fired more than 18,000 strikers earlier this year, has reduced its production costs by nearly 40 percent and halted "unnecessary" well drilling, Venezuelan President Hugo Chavez said on Sunday.

Chavez, accompanied by Energy Minister Rafael Ramirez and PDVSA President Ali Rodriguez, said the company's production costs, not counting royalty payments, were running at $4.11 per barrel this year, compared with $6.70 in 2002. Output costs in 2001 were $5.87 per barrel.

Speaking during his weekly "Hello President" television and radio show, the leftist Venezuelan president attributed the cheaper production to restructuring and cost-cutting efforts at PDVSA (Petroleos de Venezuela) following a crippling strike in December and January.

Besides firing more than 18,000 managers, office staff, technicians and workers who joined the anti-government strike, Chavez said the company had also halted what he termed unnecessary and costly drilling of wells.

"They used to be drilling here, there and everywhere, without any need... that's stopped now," he said. He added that savings from the reduced drilling activity would go toward priority government social development projects in health, education and other areas.

"PDVSA will be handing over to the national treasury every last bolivar that it should," Chavez said.

The fired PDVSA employees and other foes of Chavez say the government sackings of skilled staff and cutbacks in the oil firm have significantly reduced oil industry activity in the world's No. 5 oil exporter. They say the slump is especially acute in the western Lake Maracaibo oil and shipping hub.

Chavez repeated government assurances that production had returned to pre-strike levels and would remain there. He and PDVSA's Rodriguez put Venezuela's crude putout at 3,098,000 barrels per day (bpd) at the start of July.

The former PDVSA workers say production is well below this. They say Venezuela pumped 2.69 million bpd in June.

Chavez said the restoration of oil production following the strike was bolstering Venezuela's recession-hit economy, which contracted a record 29 percent in the first quarter of 2003.

He said the oil recovery was also prompting foreign investors to show renewed interest in Venezuela, especially in the oil and gas sector.

He cited the participation of U.S. oil firm ConocoPhillips and Italy's Eni in a $480 million project to develop the Corocoro oilfield in the eastern Gulf of Paria.

Chavez and Rodriguez added that another U.S. oil major, ChevronTexaco, and Norway's Statoil would be developing offshore natural gas fields in the northeastern Deltana region, bordering fields in Trinidad and Tobago.

Copyright 2003, Reuters News Service

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