World Energy "Areas To Watch"

The countries/regions listed in this report are: a) important from an oil and/or natural gas perspective; and b) currently (or potentially in the short- to medium-term) confronting significant economic, political, or other issues that could affect domestic or world oil and gas markets. Click on the name listed below for a brief discussion/analysis of the main concerns regarding that particular country/region's energy industry.

Evidence that unrest continues in Algeria was provided on July 28, 2002, with the reported killing of the leader of the Armed Islamic Group (GIA), Rachid Abou Tourab, along with 15 other group members. The group is suspected of attacking a bus in June, killing 13 people. In late 2002, there was a flareup of protests by the country's restive Berber minority demanding greater autonomy, increased employment opportunities, and better living conditions. The unrest has centered on the Kabyle region of northeastern Algeria.

OPEC member Algeria produces around 1.9 million barrels per day (bbl/d) of oil (of which 1.2 million bbl/d is crude, 445,000 bbl/d is lease condensates, and 250,000 bbl/d is natural gas liquids). The country exports (net) around 1.7 million bbl/d. Besides oil, Algeria is a major natural gas producer, and in 2002 exported over 2 trillion cubic feet (Tcf), mainly to Europe. Despite the country's ongoing violence and civil unrest, oil and gas exports generally have not been harmed directly. However, three foreign oil workers were murdered in 1995, and many other workers left the country. For security reasons, meetings between foreign oil companies and Sonatrach (Algeria's state oil and gas company) are generally held in Europe or North America, and oil executives rarely travel to Algiers. Algeria's hydrocarbons sector depends heavily on U.S., French, German, and Japanese technology and expertise.

The decision whether to export liquefied natural gas (LNG) from a port in Chile or from Peru is an important, politically sensitive, question for Bolivia. Economically, it appears to make more sense for Bolivia to export gas through Chile, since building a pipeline to Peru will cost significantly more money. However, opposition to going through Chile has been strong because of historical events; namely, Bolivia lost access to the Pacific Ocean in 1883, following a war with Chile. Popular revolt against former President Sanchez de Lozada, which ultimately forced him out of power, began September 15, 2003, when indigenous and workers groups began protests, strikes and roadblocks against the government’s plan to export natural gas to the United States and Mexico via Chile. In addition, many Bolivians opposed Sanchez de Lozada's promotion of foreign investment and privatization. Demonstrations against Sanchez de Lozada's natural gas plans subsequently spiraled into widespread protests against the government’s free-market policies and its failure to alleviate poverty. During the protests, many called for the nationalization of the country’s oil and natural gas reserves.

Carlos Mesa, who succeeded Sanchez de Lozada as Bolivia's President, promised that he would hold a referendum on plans to export natural gas. On July 18, 2004, Bolivians approved a series of referendum questions, giving them the option of changing the country's Hydrocarbons Law, re-nationalizing the natural gas sector; repealing Sanchez de Lozada's privatization policy, using natural gas as a means of pressure on Chile to allow Bolivia access to the Pacific Ocean, and increasing taxes on foreign energy companies. Despite the referendum, however, it appears likely that controversy and possible unrest will continue over future development of Bolivia's huge natural gas reserves. On August 5, 2004, Bolivia and Peru signed a deal for natural gas exports via Peru.

The region’s existing export infrastructure sits dangerously close to ethnic conflicts in Chechnya, Georgia, and the autonomous enclave of Nagarno-Karabakh. War in the Russian republic of Chechnya has caused a humanitarian crisis in the region, with tens of thousands of Chechens displaced and living in refugee camps in neighoring Inushetia and elsewhere. Azerbaijan’s northern “early oil” pipeline, which can carry 100,000 bbl/d, passes for 80 miles through Chechnya en route to the Black Sea port of Novorosiisk. The war in Chechnya has prompted Russia's oil pipeline monopoly, Transneft, to construct a 300,000-bbl/d Chechnya bypass, which was completed in 2000. However, a segment of the line passes along the Chechen border in the southern Russian republic of Dagestan before traversing Stavropol en route Terskoye in North Ossetia. Dagestan has security concerns of its own, as fighting has occurred in the republic between Islamic militants (largely from Chechnya) and Russian forces.

The western route for "early oil" from Azerbaijan, (as well as the 1-million-bbl/d Baku-Tiblisi-Ceyhan pipeline, under construction and scheduled for completion in the second half of 2005) passes just north of another potential conflict zone in the breakaway Azeri region of Nagorno-Karabakh. Nagorno-Karabakh is a mountainous territory populated mainly by ethnic Armenians but nestled inside predominantly Muslim Azerbaijan. Its declaration of independence in 1988 sparked a six-year war that killed more than 30,000 people and drove about 1 million people, mostly Azeris, from their homes. Six years of fighting ended in a Russian-mediated cease-fire that left the enclave and some surrounding territory--about 16% of the territory of Azerbaijan--firmly under control of an unrecognized ethnic Armenian government and its militia. Since the May 1994 ceasefire, hundreds of people have been killed each year in sporadic violence and by mines that mark a no-man's-land around the 1,600-square mile mountainous region.

Another flashpoint in the Caspian/Caucasus region is the Georgia, including the country's remote Pankisi Gorge, which Chechen rebels reportedly use as a base and refuge. On August 14, 2002, Russia accused Georgia of directly assisting Chechen rebels and allowing them to use the Pankisi Gorge as a base for attacks on Russia. On August 9, Russia's defense minister said that the Pankisi Gorge had emerged as the world's second main "nest" of terrorism. The Pankisi Gorge situation, along with Russian support for Georgian rebels in the breakaway province of Abkhazia and South Ossetia, has raised tensions between the two countries in recent years. On August 24, 2002, White House spokesman Ari Fleischer stated that the United States was "deeply concerned about credible reports that Russian military aircraft indiscriminately bombed villages in northern Georgia on August 23, 2002, resulting in the killing of civilians," and worried that the attacks could "escalate existing tension between Russia and Georgia."

In January 2004 Mikheil Saakashvili was elected to a 5-year term as President of Georgia following disputed parliamentary elections in November 2003 (as a result of popular demonstrations following these elections, President Shevardnadze resigned on November 23, 2003). In early August 2004, Saakashvili -- whose goal is to reintegrate Abkhazia and South Ossetia into Georgia -- announced, after meeting with U.S. Secretary of State Colin Powell, that he wanted to "demilitarize" and "democratize the whole region." This statement followed a statement a few days earlier in which Saakashvili threatened to open fire on ships which "illegally" entered waters off Abkhazia. Russia reacted by stating that it would respond to any such attack with "the necessary rebuff." In addition to Abkhazia, tensions with South Ossetia have flared recently, with the speaker of South Ossetia's breakaway parliament talking of a "prologue to war which would make Chechnya look small." Saakashvili stated recently that ""We are ready to fight like mad for the restoration of our territorial integrity."

Besides the ethnic conflicts in Nagorno-Karabakh, Abkahazia, and South Ossetia which affect transit routes for regional energy flows, political problems also are affecting Caspian oil and gas production. Because the southern Caspian littoral states of Iran and Turkmenistan have been unable to reach any agreement with their neighbors on delineation of the Sea's resources, development of the Caspian’s southern offshore fields has been hindered. In July 2001, Iran issued a stern warning to Azerbaijan regarding exploration activities being carried out in the Alov-Sharg-Araz block. In an escalation of tensions, Iranian military aircraft reportedly violated Azeri air space, and the head of Iran's Revolutionary Guards pointedly reminded Azerbaijan that it used to be a province of Iran, and that it should not act in any way that would antagonize Iran. In addition to the Iran-Azerbaijan dispute, Turkmenistan claims that portions of the Azeri and Chirag fields--which Turkmenistan calls Khazar and Osman, respectively--lie within its territorial waters rather than Azerbaijan's. Turkmenistan has insisted that work at the Azeri and Chirag fields, which is being carried out by the Azerbaijan International Operating Company (AIOC), be stopped. Meanwhile, Turkmenistan and Azerbaijan remain locked in a dispute over the Serdar/Kyapaz field, while Azerbaijan has objected to Iran's decision to award Royal Dutch/Shell and Lasmo a license to conduct seismic surveys in a region that Azerbaijan considers to fall in its territory. Meanwhile, Russia, Azerbaijan, and Kazakhstan have made bilateral arrangements amongst themselves, and are developing major projects in partnerships with foreign investors.

Besides East Timor, Indonesia faces separatist movements in all four of the country's most resource-rich provinces (Aceh, East Kalimantan, Irian Jaya, Riau). In Aceh, the separatist movement threatens stability in an oil and gas rich province in north Sumatra, abutting the strategically important Strait of Malacca (through which more than 300 large vessels, including oil tankers, pass each day). In early June 2003, Indonesia closed off access to waters around Aceh in order to prevent weapons from reaching Aceh separatists. In May 2003, Indonesia declared martial law and dispatched 40,000 troops to Aceh.

In addition to Aceh, there also have been incidents of communal violence between Muslims and Christians in the Malacca islands. Meanwhile, communities in Irian Jaya (West Papua) and Kalimantan have demanded higher revenues from natural resources produced in their regions, and a low-level insurgency in Irian Jaya has cast doubt on plans for an LNG facility in Tangguh. In August 2002, China chose Australia's Northwest Shelf Venture over Tangguh to supply it with $13 billion worth of LNG over 25 years. In part, the decision was made due to concerns over reliability of gas supplies from Indonesia compared to Australia.

In March 2001, citing deteriorating security conditions around the Arun LNG facility (including a kidnapping incident and an accidental shooting of an ExxonMobil plane in December 2000), ExxonMobil withdrew its personnel and ceased operations at the site. The company resumed limited operations on July 19, 2001. In June 2001, ExxonMobil was sued by the International Labor Rights Fund for atrocities allegedly committed by Indonesian military forces guarding ExxonMobil facilities in that country. In early July 2003, ExxonMobil announced that it was laying off 1,200 service workers at Arun due to a need for less manpower as production declines at the aging facility, which ExxonMobil runs along with Pertamina and Japan Indonesia LNG.

Aside from regional unrest, Indonesia is also managing threats posed by Jemaah Islamiyah, an Al Qa'ida-linked terrorist group. Jemaah Islamiyah was responsible for the 2001 nightclub bombing in Bali, a 2003 hotel bombing in Jakarta, and is now targeting Western business and political figures in Indonesia, according to recent reports. Jemaah Islamiyah is seeking to undermine foreign economic interests in the country, according to Western security officials.

Continuing points of contention between Iran and the United States include: 1) Iran's pursuit of a nuclear power capability, with the assistance of Russia (the United States has stated its belief that Iran is pursuing a covert nuclear weapons program); 2) Iran's opposition to the Middle East peace process; 3) US accusations of Iranian support for various terrorist groups, including al-Qaeda; 4) Iranian purchases of missiles and other military equipment from North Korea, Russia, and elsewhere; 5) the Iran and Libya Sanctions Act of 1996 (Public Law104-073), which authorizes the imposition of US sanctions against foreign companies investing in Iranian oil or gas projects (originally applied to investments of $40 million or more annually, automatically lowered to $20 million one year after enactment); and 6) Iran's occupation of three islands in the Persian Gulf also claimed by the United Arab Emirates. The United States has had no diplomatic ties with Iran since 1979, after Islamic militants stormed the US Embassy and held 52 Americans hostage for 444 days.

In June 2003, Iran experienced several days of significant protests and unrest directed against the country's rulers. Also in June 2003, Iran stated that it would not agree to more intrusive nuclear inspections demanded by the International Atomic Energy Agency (IAEA), the United States, and the European Union. In September 2003, the International Atomic Energy Agency (IAEA) gave Iran until October 31 to provide guarantees that its nuclear program was for peaceful purposes and to open the country to snap inspections by the IAEA. On October 6, 2003, Iran's envoy to the IAEA, Ali Akbar Salehi, said that Iran would withdraw from the Nuclear Non Proliferation Treaty (NNPT) if Western pressure continued. On October 30, IAEA head Mohammed el-Baradei declared that Iran's report on its nuclear activities appeared to be "comprehensive," but that he would still have a lot of questions. On November 14, Iran's Foreign Minister, Kamal Kharazzi, said that his country was committed to "complete transparency," and added that the IAEA report made clear that Iran's nuclear program was for peaceful purposes. On December 18, Iran signed a protocol to the NNPT that will allow the IAEA to have more comprehensive access to sites in the country. It is not known when Iran will officially ratify the protocol. In mid-March 2004, Iran announced that it was barring nuclear inspectors from entering the country for an indefinite period of time after the IAEA passed a resolution rebuking Iran for failure to fully disclose the details of its past nuclear activity. However, Iran shortly reversed course and allowed IAEA inspectors to continue their work. On August 9, 2004, President Bush stated that "Iran must comply with the demands of the free world" and abandon its suspected nuclear weapons program.

In late June 2003, following pressure from the United States, Japax said that it would not sign a major oil deal with Iran -- on development of the gigantic Azadegan field -- unless Iran addressed international concerns over its nuclear program. In February 2004, however, a Japanese consortium led by Inpex signed an agreement on the $2-$2.8 billion project. Inpex, which has no upstream experience of its own, hopes to bring in an international partner -- possibly Total, Statoil, Sinopec, or Lukoil (while Shell has indicated that it is not interested) -- as the field's operator. One Japanese partner in the Inpex consortium -- Tomen -- has pulled out of the project (possibly under U.S. pressure), while another member -- Japex -- is considering pulling out as well. Initial production of medium-sour crude oil from Azadegan could come in 2007, ramping up from 50,000 bbl/d to 260,000 bbl/d by 2012. At its peak, Azadegan production could account for as much as 6% of Japan's oil imports.

In 2003, Iran produced around 3.9 million bbl/d of oil (of which 3.7 million bbl/d was crude), with net exports of around 2.5 million bbl/d. It is possible that, with sufficient investment, Iran could increase its oil production capacity significantly. Iran produced 6 million bbl/d in 1974, but has not surpassed 3.9 million bbl/d on an annual basis since the 1978/79 Iranian revolution.

Prior to the war, during January and February 2003, Iraq was producing around 2.5 million bbl/d and exporting 2.0 million bbl/d, mainly via the country's two U.N.-authorized export routes: the Turkish port of Ceyhan; and the Persian Gulf port of Mina al-Bakr. In addition, Iraq reportedly was smuggling 200,000-400,000 bbl/d of crude oil and products via a number of routes, including Turkey, Syria, Iran, Dubai, and Jordan. For 2002 as a whole, Iraq produced around 2.0 million bbl/d of oil and exported around 1.5 million bbl/d under UN Security Council Resolution 986, which allowed for Iraqi oil sales in order to raise revenue for humanitarian purposes, war reparations, and UN operations in Iraq.

In the years preceding the war, and in anticipation of the eventual lifting of economic sanctions, Iraq had signed or otherwise negotiated several potentially lucrative oil and gas deals (which will come into effect when sanctions are lifted) with companies from Russia, France, and China, and also had invited international partners to invest in natural gas projects worth $4.2 billion. Following the war, the status of these agreements is now somewhat unclear.

According to the Oil and Gas Journal, Iraq contains 115 billion barrels of proven oil reserves, the third largest in the world (behind Saudi Arabia and Canada). Estimates of Iraq's oil reserves and resources vary widely, however, given that only 10% or so of the country has been explored. Some analysts (the Baker Institute, Center for Global Energy Studies, the Federation of American Scientists, etc.) believe, for instance, that deep oil-bearing formations located mainly in the vast Western Desert region, for instance, could yield large additional oil resources (possibly another 100 billion barrels or more), but have not been explored. Other analysts, such as the US Geological Survey, are not as optimistic, with median estimates for additional oil reserves closer to 45 billion barrels. Historically, Iraqi production peaked in December 1979 at 3.7 million bbl/d, and then in July 1990, just prior to its invasion of Kuwait, at 3.5 million bbl/d. As of early August 2004, however, Iraq was producing only 2.0 million bbl/d.

On June 28, 2004, direct diplomatic relations between the United States and Libya were restored after 24 years. In February and April 2004, U.S. economic sanctions against Libya were eased, eliminating travel restrictions and allowing investment by U.S. corporations, including in Libya's petroleum sector, as well as Libyan investment in the United States. The application to Libya of the ILSA was terminated in April, 2004. This followed fulfillment of Libyan commitments to rid itself of weapons of mass destruction (WMD) and Missile Technology Control Regime (MTCR)-class missile programs, and to renounce terrorism. Despite the improvement in U.S. Libyan relations as of July 2004, the United State has not reinstated full diplomatic and economic ties, including the opening of embassies in Washington, D.C. and Tripoli. Libya also remains on the State Sponsors of Terrorism List.

With the relaxation of sanctions and the restoration of US-Libyan diplomatic relations, numerous oil and gas companies are eager to either expand operations and/or reenter the country. its estimated 36 billion barrels of high-quality oil reserves as well as geographic proximity to western markets. Occidental Petroleum, ConocoPhillips, Marathon Oil, and Amerada Hess have begun negotiations with Libya's National Oil Corporation to resume operations from which they withdrew in 1986, when U.S. sanctions forced their departure. The companies had standstill agreements that froze their stakes in Libya's petroleum sector while sanctions were in place. While Libya reportedly would like production to resume under the old conditions, U.S. companies aim to renegotiate the terms of contract. According to press reports, Occidental is looking to improve profit margins by reducing royalties and taxes, in line with other international investments. More importantly, Occidental and other U.S. energy firms are said to want a stake in exploring and developing new concessions. The U.S. companies will have to compete with foreign firms already established in Libya, including Spain's Repsol, France's Total, and Norway's Norsk Hydro.

On March 24, 2003, Shell evacuated four oil facilities -- oil pipeline pumping stations at Ogbotobo, Opukushi, Tumo and Benisede -- raising the number of closed Shell facilities to 14. These actions shut in 320,000 bbl/d, or nearly one-third of Shell's Nigerian output. Shell stated that an additional 50,000 bbl/d of Nigerian Bonny Light oil production was being lost in the east Niger Delta. ChevronTexaco shut in oil production totaling 440,000 bbl/d and was forced to evacuate its workers from offshore platforms and its Escravos export terminal. Total shut down operations producing 7,500 bbl/d in the area. At the peak, a total of 817,500 bbl/d, or nearly 40% of Nigeria's production, was shut in. On April 4, 2003, ChevronTexaco announced that "operations staff and support workers are returning to the Escravos terminal in the Western Niger Delta area of Nigeria and a gradual return to production is beginning." On April 10, 2003, Royal Dutch/Shell announced that it had restarted 100,000 barrels per day of production and two weeks later, ChevronTexaco lifted the force majeure on crude oil exports from Escravos.

On April 24, 2004, five people were killed in Nigeria’s Delta region, including two Americans and three Nigerians, when gunmen attack a boat carrying oil workers. The five oil workers were reportedly investigating ChevronTexaco facilities which had been abandoned in March 2003 but had since been considered for re-opening. Following the attack, ChevronTexaco withdrew all personnel from the Western Delta region and suspended activities in the area pending an assessment of the security situation. In June 2004, labor unions staged a three-day general strike, threatening Nigerian oil exports.

In general, the security situation in Nigeria is characterized by high rates of violent crime, ethnic and religious strife. Over 10,000 Nigerians have died in communal or religious violence over the past few years. Of particular concern to non-Muslims has been the imposition of Islamic Law (Sharia) in the country's predominantly Muslim northern states. Besides unrest and political instability, Nigeria also faces serious economic problems, including wide income disparities.

Illegal fuel siphoning as a result of a thriving black market for fuel products has increased the number of oil pipeline explosions in recent years. The most serious disaster was the October 1998 Jesse fire in which over 1,000 people died. One of the latest pipeline explosions outside Warri city in July 2000 resulted in 250 deaths, and marked (at least) the fifth such explosion during the last two years. In an effort to stop vandalism, the Nigerian government has ordered satellite equipment from the United States to monitor pipeline and oil installations in the Niger Delta region. In January 2001, the Nigerian navy announced plans to clamp down on arson attacks on oil facilities following the loss of about $4 billion in oil revenues last year due to vandalism. The Federal government also has ordered the navy to sink any ship conveying crude products that cannot be accounted for. The government estimates that as much as 300,000 bbl/d of Nigerian crude is illegally bunkered (freighted) out of the country. In December 2000, Nigeria reinstated the death penalty for vandalism of pipelines and electricity infrastructure. On June 5, 2004, the Nigerian military killed 17 bandits in the oil-rich Delta state as part of an effort to combat oil theft, piracy, and kidnappings of oil workers in the area.

Nigeria is one of the world's leading oil exporters, with production of around 2.6 million bbl/d of oil (of which 2.4 million bbl/d is crude), and with net oil exports of around 2.2 million bbl/d, including around 1.1 million bbl/d to the United States.

Russia has proven oil reserves of 60 billion barrels, with 2003 total liquids production of 8.4 million bbl/d (8.2 million bbl/d of which was crude oil)--a 10% increase over 2002 levels and almost 40% higher than 1998 output. Russian net oil exports in 2003 were 5.76 million bbl/d, with major customers including Europe and the Commonwealth of Independent States (CIS). In addition to oil, Russia holds the world’s largest natural gas reserves, with 1,680 trillion cubic feet (Tcf) -- more than twice the size of Iran's, the country with the second largest natural gas reserves. Also, in 2002 Russia was the world’s largest natural gas producer (21 Tcf), as well as the world’s largest exporter (6.5 Tcf).

In late April 2004, Aramco's Chief Executive, Abdullah Jumah, said that "there is nowhere in the world that oil facilities are protected as well as in Saudi Arabia." According to Jumah, Aramco employs 5,000 security guards to protect oil facilities. In addition, the Saudi National Guard, regular Saudi military forces, and Interior Ministry officers are tasked with protecting oilfields, pipelines (the country has around 10,000 miles), ports (Ras Tanura, Al Juaymah, Yanbu), refineries, and other oil facilities (gathering centers, gas-oil separation plants, etc.). In May 2004, Nawaf Obaid, an advisor to the Saudi royal family, said that the Saudi government had added $750 million to its security budget over the past two years to beef up security in the oil sector. According to Obaid, the Saudis spent $5.5 billion in 2003 on oil security. In addition to direct security, Saudi Arabia is known to maintain "redundancy" (i.e., multiple options for transportation and export) in its oil system, in part as a form of indirect security against any one facility being disabled.

Saudi Arabia maintains crude oil production capacity of around 10.0-10.5 million bbl/d, while producing around 9.5 million bbl/d. This leaves Saudi Arabia with 0.5-1.0 million bbl/d of surplus production capacity to make up for supply losses elsewhere in the world and to help maintain oil prices at desired levels. In recent months, however, with world oil demand surging, with a variety of potential oil supply disruptions, and with OPEC spare capacity outside of Saudi Arabia essentially exhausted, questions have been raised about the need for Saudi Arabia to boost its production capacity. Saudi Arabia claims that it is "easily capable" of producing up to 15 million bbl/d in the future and maintaining that production level for 50 years, but others doubt this claim. Matthew Simmons of Houston-based Simmons and Company International, for instance, has disputed Aramco's optimistic assessments of Saudi oil reserves and future production, pointing to -- among other things -- more rapid depletion rates and a higher "water cut" than the Saudis claim. EIA's baseline forecast assumes that Saudi oil production capacity could reach 18.2 million bbl/d by 2020, and 22.5 million bbl/d by 2025.

As of January 2004, Sudan's estimated proven reserves of crude oil stood at 563.3 million barrels. Current oil production averages about 345,000 bbl/d, with exports of about 270,000 bbl/d. Output has been rising steadily since the completion of a vital pipeline in July 1999. Development of Sudan's oil resources has been highly controversial. Numerous international human rights organizations have accused the Sudanese government of financing wide-scale human rights abuses with oil revenues, including the mass displacement of civilians living near the oil fields.

In May 2004, after two years of negotiations (starting with the July 2002 Machakos Protocol), the government and SPLA reached agreement on several major issues -- sharing of oil revenues (50/50), the application of Islamic religious law (will not be applied in the South), self-determination for the southern Sudan (a referendum on secession will be held after a transitional period of six years), etc. A final resolution of Sudan's civil war could greatly help the country's economy, lead to the lifting of various sanctions against the country, and encourage investment by foreign companies (including oil companies).

A new crisis in the western Sudanese region of Darfur has killed 10,000-30,000 people created nearly a million refugees in recent months. Pro-government militia groups have launched attacks against civilians, mainly non-Arab tribes, in the region, prompting the United States to call for a U.N. Security Council resolution and possible sanctions on the militia groups. In addition, U.S. Secretary of State Colin Powell visited Darfur in late June 2004. In early July, the African Union demanded that Sudan arrest and prosecute the militia groups, also known as the Janjaweed, and decided to send 300 African Union troops to Darfur. On July 3, Sudan agreed to disarm militias accused of "ethnic cleansing" in the region. The conflict in Darfur has complicated attempts at ending the country's larger civil war.

Sudan remains under a State of Emergency, originally declared on December 12, 1999. In March 2000, Swedish company Lundin Oil was forced to suspend operations in Block 5A due to safety concerns and logistical problems associated with the construction of an access road to the site. On March 27, 2003, OMV of Austria announced that the consortium of which it is a member, along with Lundin of Sweden, Petronas of Malaysia, and Sudapet of Sudan, was renewing exploration activities in Sudan after being suspended in January 2002 due to a deteriorating security situation. In March 2003, Talisman -- under pressure by human rights organizations -- sold its 25% in GNPOC to India's national oil company, ONGC Videsh, for $770 million, leaving Sweden's Lundin as the only Western oil company with any equity in Sudan. Talisman -- and other western companies -- have left Sudan in recent years after being criticized heavily by human rights groups for cooperating with the Sudanese government. In turn, companies from Asia -- CNPC, Petronas, ONGC -- have taken their place. In August 2003, ONGC also acquired stakes in two Sudanese oil blocks, 5A and 5B, from OMV.

Although the general work stoppage ended on February 3, 2003 in non-oil sectors, there has been no resolution to Venezuela's problems. A referendum (recall vote) on whether the president should step down after the midpoint of his six-year term is currently scheduled for August 15, 2004. On June 2, 2004, Venezuela's National Electoral Council (CNE) had announced that that the political opposition had collected enough signatures to trigger such a recall vote. Under the Venezuelan constitution, if President Chávez is recalled before August 19, 2004, new elections will be held within 30 days.

Continued instability in Venezuela has had serious implications for the country's energy sector, its state oil company, Petróleos de Venezuela (PdVSA), and world oil markets. Prior to the December 2002 oil strike, Venezuela was producing around 3 million bbl/d of crude oil and lease condensates. In December 2002 and January 2003, Venezuela's production fell to 1 million bbl/d and 630,000 bbl/d, respectively, with a recovery to around 2.6 million bbl/d by April. Overall, in 2003, Venezuela produced 2.6 million bbl/d of oil (of which 2.3 million bbl/d was crude oil), and exported around 2.25 million bbl/d, including around 1.4 million bbl/d to the United States (not counting around 200,000-300,000 bbl/d of Venezuelan crude refined in the Caribbean and then sent to the United States). Currently, Venezuela produces around 2.8 million bbl/d of oil, of which 2.5 million bbl/d is crude. The country's current OPEC crude oil production quota is 2.992 million bbl/d. In the past, Venezuela was widely considered one of OPEC's main "over-producers," but in recent years appears to have adhered more closely to its OPEC production limits. (Note: there is disagreement over the level of Venezuelan oil production, with the Venezuelan government maintaining that the country is producing several hundred thousand bbl/d more than most outside analysts believe to be the case).

Sources for this report include: Associated Press; CIA World Factbook; Dow Jones; Economist Intelligence Unit ViewsWire; Global Insight; Oil and Gas Journal; US Commerce Department, International Trade Administration -- Country Commercial Guides; New York Times; Oil Daily; Petroleum Intelligence Weekly; Reuters; Russian Petroleum Investor; US Energy Information Administration; Wall Street Journal; Washington Post; World Markets Online.

If you liked this Country Analysis Brief or any of our many other Country Analysis Briefs, you can be automatically notified via e-mail of updates. You can also join any of our several mailing lists by selecting the listserv to which you would like to be subscribed. The main URL for listserv signup is http://www.eia.doe.gov/listserv_signup.html. Please follow the directions given. You will then be notified within an hour of any updates to Country Analysis Briefs in your area of interest.

Return to Country Analysis Briefs home page

File last modified: August 10, 2004

Contact:

Lowell Feld
lowell.feld@eia.doe.gov
Phone: (202)586-9502
Fax: (202)586-9753

URL: http://www.eia.doe.gov/cabs/hot.html

If you are having technical problems with this site, please contact the EIA Webmaster at wmaster@eia.doe.gov