Chavez: OPEC Should Be More Political

Venezuelan, Ecuadorean Leaders See Opportunity Within Oil Cartel To Promote Anti-U.S. Agenda

(AP)  Venezuelan President Hugo Chavez has found an ally in Ecuador as he seeks to expand his influence within OPEC at a time when analysts say his country is struggling to maintain oil production.

Ecuador will be represented by President Rafael Correa this weekend at the Organization of Petroleum Exporting Countries summit in Saudi Arabia as the Andean country reactivates a membership that has been suspended since it stopped paying cartel dues in 1992.

Chavez is pleased with Ecuador's return, and analysts say his reasons range from the political to the practical. They say he wants to keep OPEC oil production quotas in check and prices high - a stance Ecuador appears to share - while also pushing the cartel to take on broader political roles internationally.

"OPEC must be an organization that goes beyond energy, and it must have political characteristics," Chavez said Tuesday, proposing that OPEC come up with a plan to sell oil to poor countries at dramatically lower prices than those paid by wealthy nations. The cartel, he stressed, should "raise its level of political action."

That stance is likely to be echoed by Correa, who shares Chavez's antagonism toward Washington and his critiques of free-market capitalism. Even with Ecuador on board, though, analysts say Venezuela won't easily sway other OPEC members to restrain production in the long-term if oil powers like Saudi Arabia push for an increase.

"Chavez and other more hawkish members within OPEC will gain an ally in Ecuador, which has an interest also in defending a reasonably high price benchmark in order to maximize revenues," said Patrick Esteruelas, an analyst at the New York-based Eurasia Group. "It will still prove very little essentially against Saudi Arabia, which overshadows both countries combined."

Ecuador is a marginal oil producer with approximately 507,000 barrels a day in production - a small industry that would be hard-pressed to increase output. Analysts say the influence gained by Chavez within OPEC will be modest.

In September, OPEC bowed to pressure from U.S. ally Saudi Arabia and announced a production increase of 500,000 barrels a day, effective Nov. 1. There has been speculation the Saudis, OPEC's top producer and most influential member, could soon press for another similar output increase, which could send oil prices lower.

Saudi Arabian Oil Minister Ali al-Naimi said Tuesday that OPEC will not discuss output levels at this weekend's summit, but that it may discuss increasing production at a meeting next month in the United Arab Emirates.

John Hall, an analyst with John Hall Associates in London, noted that the Saudis successfully pressed for the last 500,000 barrel-a-day increase despite opposition from other key members.

"The Saudis can do things like that, but Chavez cannot," Hall said.

This week's summit won't offer Venezuela's president a chance to argue against increased production quotas, but it will give Chavez and another OPEC leader - Iranian President Mahmoud Ahmadinejad - another opportunity to bash U.S. President George W. Bush.

"He's gathering allies around the world, and within the OPEC cartel, who will back him up when he says 'We hate America,'" Hall said. "It helps him campaign against Bush."

Oil analysts say if OPEC eventually decides to boost output, it could put Venezuela in a bind. Venezuela is by the accounts of many oil watchers struggling to maintain production.

According to OPEC's October report, Venezuela's production fell from an average of 2.53 million barrels of oil a day in 2006 to an average of 2.38 million barrel a day during the first three quarters of 2007.

Venezuelan Oil Minister Rafael Ramirez has disputed those figures, saying Venezuela's output is more than 3 million barrels a day.

But oil analyst Juan Carlos Sosa says the state oil company continues to suffer from disorganization and a loss of personnel resulting from a two-month anti-Chavez strike that paralyzed the industry and ended in early 2003 with Chavez dismissing thousands of employees.

"The reality is that investment needed to maintain output is down and production capacity has been lost," said Sosa, editor of the Venezuelan oil industry magazine PetroleoYV.

Esteruelas said social programs are sapping billions from dollars from Petroleos de Venezuela SA that would otherwise go toward investment, while at the same time the state firm is trying to consolidate control over the industry after assuming majority shares in the last privately run oil fields in May.

The OPEC secretariat says it is still unclear whether Ecuador will formally join OPEC at this month's summit or next month's meeting.

The cartel supplies about four out of every 10 barrels on world oil markets.