Last week Venezuela's National Election Council fined Ramirez nearly $9,000 for telling employees at Petroleos de Venezuela SA that it would be a "counterrevolutionary act" to not support the leftist Chavez.

Ramirez's remarks, caught on videotape, were reportedly made ahead of the December 2006 presidential election, which Chavez won handily.

The PDVSA president is also accused of telling employees that a colleague had already lost his jobs for what was deemed a traitorous act against Chavez.

Ramirez denied any wrongdoing and insisted he didn't break Venezuelan laws that stipulate state-run agencies like PDVSA cannot back any one candidate.

However, David Pumphrey, a senior energy fellow at the Center for Strategic & International Studies in Washington, said the remarks by Ramirez are emblematic of PDVSA's gradual evolution into a "technocratic organization" where professed loyalty to the president supersedes job performance and ability.

"There are strong concerns (in the United States) that some employees at PDVSA are getting higher positions in PDVSA because of their professed loyalty to Chavez," Pumphrey told United Press International Tuesday.

Meanwhile, the majority of revenue from the continent's largest oil and gas reserves is going towards funding Chavez's wide-ranging social programs, with little being spent to maintain and improve PDVSA's existing infrastructure, Pumphrey added.

Concerns about the long-term health of PDVSA come at a time when Chavez has sought to take full control of the Venezuelan petroleum sector.

Earlier this month Ramirez announced the country was keen on creating its own "Halliburton" to develop the country's own fields and reduce dependency on foreign firms.

"We can have our own Halliburton, ours, the Bolivarian one," said the PDVSA head, referring to Simon Bolivar, the 19th century general who helped several Latin American countries win independence, including Venezuela.

Venezuela's pledge to improve its oil production follows a recent report that Latin America's largest oil producer was suffering from equipment shortages responsible for waning production levels.

Ramirez denied that the country's production levels have fallen off in recent years.

In July, Luis Vierma, exploration and production vice president at PDVSA, said Venezuelan oil faces a "significant operational emergency" if it does not increase the number of rigs operating in the country and that the state firm fell short of its 2007 goal of getting 191 rigs online in 2007 and producing some 3.3 million barrels per day.

So far, he said, 112 rigs were online as of July, and by the end of the year their numbers would only likely increase to 120. "Venezuela is moving toward technological independence, but it will take a long time," said Vierma.

PDVSA's independence could take even longer considering Venezuela's oil output is believed to have slipped by more than 250,000 barrels per day from a year ago, according to the Paris-based International Energy Agency. Production has reportedly decreased from 2.6 million bpd to 2.37 million bpd.

Some opposition lawmakers have accused Ramirez and others in PDVSA of corruption.

Hoping to counter the production shortfall, PDVSA announced recently that it was investing $3.5 billion in new oil rigs, a much-needed injection of cash for improvements to a sector that some experts say has been abused by President Hugo Chavez for his social programs.

State energy officials' concerns about "an operational emergency" could be a calculated effort to jumpstart the oil sector, said some analysts.

"Recent statements by PDVSA officials declaring the company in 'operational emergency' seem to aim at legitimizing a fast-track procurement process that bypasses normal bidding rules," read a July report by the New York-based Latin Source.

(e-mail: [email protected])

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