Brazil's ANP, Petrobras lock horns over gas flaring

Brazil's National Petroleum Agency (ANP) reported that Petroleo Brasileiro SA (Petrobras) flares more than 8 million cu m/day (MMcmd) of natural gas in the Campos basin off Rio de Janeiro state.

By an OGJ correspondent

Rio de Janeiro, July 10 -- Brazil's National Petroleum Agency (ANP) reported that Petroleo Brasileiro SA (Petrobras) flares more than 8 million cu m/day (MMcmd) of natural gas in the Campos basin off Rio de Janeiro state.

That is a volume equivalent to a deferred cost of $250 million/year, if the gas were utilized commercially, ANP claimed, criticizing the flaring levels as "unacceptable."

The agency also noted that Brazil imports a significant volume of gas from Bolivia, citing Petrobras's own equity participation in those Bolivian imports as well as in the pipeline that delivers the Bolivian gas to Brazil.

Campos flaring levels disputed
Jose Coutinho Barbosa, Petrobras exploration and production director, rebuffed the ANP report, saying, "The natural gas being flared in the Campos basin is approximately 4.8 MMcmd. This average is 23% less than the average for 2001 (6.2 MMcmd) in spite of the current output of natural gas being 22% higher than the average for 2001 (16.35 MMcmd).

"In 2001, Petrobras fully complied with the daily flare-off target of 6.24 million cu m set by the ANP," Barbosa added. The 2002 target is still being negotiated with the ANP and will be less than the 2001 figure, the Petrobras executive pointed out.

The improvement in flaring levels since 2001 is partially the result of a major investment program by Petrobras in the addition of field compression and the expansion of existing pipelines. These investments are long-term in nature and will require a further 2 years to complete. "While this investment program remains incomplete, Petrobras has opted to cut potential oil output from the Campos basin by around 20,000 b/d with a view to reducing the gas flare-off in this basin," said Barbosa.

"Further reductions in natural gas volumes burnt would be possible only if Petrobras were to further reduce oil output, a move which would negatively impact the goal of Brazilian self-sufficiency by 2005," noted the director. The Campos basin is responsible for 80% of Brazil's domestic crude oil output of around 1.65 million b/d.

Bolivian vs. Brazilian gas
According to Petrobras, there is no relation whatsoever between the importation of 10 MMcmd of Bolivian natural gas and the gas that is flared in the Campos basin. The Brazilian company also emphasized "that no financial advantage accrues to Petrobras by selling additional quantities of (Bolivian) natural gas (vs. flaring domestic gas production)."

"The Bolivian gas, is imported for around $3.04/MMbtu, including transport and commercializing margins and is sold in the states of Mato Grosso do Sul, São Paulo. Santa Catarina, Paraná, and Rio Grande do Sul," Barbosa told OGJ.

Brazilian natural gas prices in sales to industrial users average average $2.09/MMbtu.

Priority is always given to natural gas from the Campos basin in satisfying market demand, Barbosa said, adding, "It is not true in the assertion that output has been reduced in order to comply with deliveries under the Bolivian supply contract," said Barbosa. He argues that this contract states that volumes not currently taken up may be used at some stage in the future, according to clearly established rules.

"Petrobras reinjects around 0.5 MMcmd natural gas. . .in the Campos basin, for supplementary recovery of petroleum, and is investing in a project that will enable the injection for storage of an additional 2.4 MMcmd. The project should be completed by yearend 2003," Barbosa told OGJ.

The natural gas from the Campos basin mainly supplies the states of Rio de Janeiro and Minas Gerais, while Bolivian natural gas goes to the states of Mato Grosso do Sul, São Paulo, Paraná, Santa Catarina, and Rio Grande do Sul, as well as being used by the thermoelectric power generating plants under the federal government's Priority Thermoelectricity Program.

According to Barbosa, almost all of the associated natural gas produced in the Urucu field in the state of Amazonas (7.6 MMcmd) is being reinjected back pending development of a market for it.

Petrobras says that Petrobras's natural gas production this year is projected at 45 MMcmd, with 20 MMcmd of that total coming from the Campos basin.

Barbosa declined to identify the costs of producing natural gas in Bolivia and Brazil, citing proprietary concerns.

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