Analysis: Venezuela's oil industry

By Briony Hale BBC News Online business reporter

Venezuela's oil is exceptionally important to both Venezuela itself and to the rest of the world.

As such, the army is regularly enlisted to protect output by defending installations, tankers and refineries.

World's top oil exporters

Saudi Arabia
320m tonnes

Norway
146m tonnes

Russia
144m tonnes

Iran
116m tonnes

Venezuela
115m tonnes

source: IEA 2000

That's because oil is so important to Venezuela that it has also become a target for attacks.

When protesters really want to make their message hit home, they target the oil industry.

It was controversy over the state-owned oil firm, for example, that acted as the catalyst for last April's coup which temporarily ousted president Hugo Chavez from power.

And Mr Chavez is left with no doubt about the source of his political and economic power.

Top earner

"It's as if the doctor, who's supposed to be looking after your heart, suddenly tries to stop it," Mr Chavez said about the latest attempts to disrupt supply.

Oil is indeed the lifeblood of the South American country's economy.

It accounts for about half of total government revenues and about one third of gross domestic product.

Venezuela produces about three million barrels a day of crude oil, and exports about 75% of that.

And of the country's $3bn-4bn in annual foreign investment, almost all of it is channelled into the energy industry.

US dependence

The ability of Venezuela to continue pumping oil also has wider implications for oil markets around the world.

Venezuela is the fifth largest oil exporter in the world, and supplies about 13% of daily oil imports into the US.

The removal of any such significant oil producer from the supply chain is almost certain to squeeze prices higher.

And the US, in particular, is left scrabbling around for alternative cargoes of not just crude oil, but also refined products such as petrol, jet fuel and diesel.

Secure supply is especially important at present, given the ongoing uncertainty surrounding supply from the Middle East in the case of a US-led war against Iraq.

Formative years

It was 1921 when black gold was first discovered in Venezuela.

Production surged quickly, and by the start of the second world war, Venezuela had become second only to the US in total output.

In 1960, it was a founding member of the Opec oil cartel, which still controls prices by regulating the amount of oil pumped onto the markets by member countries.

In recent years, Venezuela's oil output has begun to stutter, largely because of difficulties at the state-owned firm, PDVSA.

This year, Ali Rodriguez has been brought in from his position as secretary-general of Opec in order to try to turn around the troubled firm.

But most experts say he will struggle to introduce any real change while Hugo Chavez remains in power.