Peter Howard Wertheim
OGJ Correspondent
RIO DE JANEIRO, Sept. 16 -- Brazil's Mines and Energy Minister Dilma Rousseff and executives of China's state-owned Petroleum & Chemical Corp. (Sinopec) have signed a memorandum of understanding (MOU) whereby Sinopec will evaluate whether to participate in the Gasene gas pipeline project in Brazil.
Gasene will be a 1,225 km natural gas pipeline linking Cabiuna's gas processing plant in Rio de Janeiro state and customers at Catu in Bahia state. Construction on the $1.3 billion pipeline is scheduled to begin in July 2005 and to be completed in January 2007, a ministry spokesperson told OGJ.
The Export-Import Bank of China, a state-owned bank tasked with supporting China's exports, is expected to extend a financing line to the Brazil National Economic Development and Social Bank, which also will provide partial financing.
The MOU followed an official visit by Brazil's President Luiz Inácio Lula da Silva to China in May, leading a large business contingent. Among other accords, Brazil's state-owned oil company Petroleo Brasileiro SA (Petrobras) and Sinopec inked a strategic cooperation agreement centered around partnerships in oil exploration, production, refining, oil products sales, petrochemicals, pipeline engineering services, and technical cooperation, (OGJ Online, May 27, 2004).
Four gas pipelines currently link Cabiunas to gas markets in Rio de Janeiro state: 85 km to Campos, 95 km to Arraial do Cabo, and two pipelines extending 178 km and 184 km to Petrobras's Duque de Caxias (Reduc) refinery.
Petrobras said Sinopec also is eyeing Petrobras's giant natural gas reserves in the Santos basin off the industrial state of Sao Paulo. Petrobras Gas and Energy Director Ildo Sauer said the Santos basin discovery, which represents a "revolution" for the Brazilian gas market, could produce 55 million cu m/day (MMcmd) of gas for a 20-year period, surpassing Petrobras's current 46.2 MMcmd total gas production (OGJ Online, Sept. 8, 2003).
One way Sinopec could get in on the action in Santos, Petrobras said, would be to participate in a planned plant to liquefy Santos basin gas to supply local markets and to export to the US. That concept currently is at a very early stage.
Oil exports
Separately, Petrobras expects its oil exports to China to increase significantly this year, making it the third-leading destination for Brazilian crude shipments behind the US and Argentina.
Petrobras hopes to boost crude shipments to China to 50,000 b/d, about 20% of the 250,000 b/d it exports, said a Petrobras official. At that pace, exports to China would reach about 18 million bbl this year, say local analysts.
The Brazilian company started exporting heavy crude to China in 2000, when it shipped 3 million bbl. The volume trailed off to 800,000 bbl last year, but soared again in early 2004 to 4 million bbl of heavy crude as Brazil and China advance plans to increase bilateral trade and cooperation.
Contracts now valued at $120 million have the potential to reach $450-500 million by yearend. China currently imports about 2 million b/d of oil.
The bulk of Brazil's oil output is heavy crude, part of which the county exports and part of which is blended with imported light oil for processing at local refineries.