Brazil moves to lower dependence on Bolivian gas

To reduce reliance on Bolivian natural gas, Brazil's Petroleo Brasileiro SA (Petrobras) is accelerating plans to enhance domestic production (OGJ Jan. 23, 2006, p. 32). It has presented a plan to the National Energy Council for authorization to increase gas output in its southeast region to 40 million cu m/day by yearend 2008 from 15.8 million cu m/day.

June 2, 2006

3 min read

Peter Howard Wertheim
OGJ Correspondent

RIO DE JANEIRO, June 2 -- To reduce reliance on Bolivian natural gas, Brazil's Petroleo Brasileiro SA (Petrobras) is accelerating plans to enhance domestic production (OGJ Jan. 23, 2006, p. 32). It has presented a plan to the National Energy Council for authorization to increase gas output in its southeast region to 40 million cu m/day by yearend 2008 from 15.8 million cu m/day.

Petrobras plans to develop two new oil and gas fields in the southeastern state of Espirito Santo and increase gas production in Marlim field in the Campos basin off Rio de Janeiro and in Merluza field in the Santos basin.

Fuel fight
The clash between Brazil and Bolivia over energy is worsening, with Bolivia's Hydrocarbons Minister Andrés Soliz Rada declaring that negotiations are paralyzed.

Jorge Alvarado, president of Bolivia's state-owned Yacimientos Petroliferos Fiscales Bolivianos (YPFB), on May 30 accused Petrobras of sabotaging Bolivia's diesel supply, and the country threatened sanctions against Petrobras.

Soliz Rada said Bolivia would push to raise the price of gas sold to Brazil to $7.50/MMbtu from $3.80/MMbtu. On average, Brazil has been importing 25 million cu m/day of gas, about half of its consumption.

On May 1 Bolivia nationalized international upstream oil and gas interests, including those of Petrobras the largest foreign investor in the country's oil and gas industry, and refused to compensate the companies (OGJ, May 8, 2006, Newsletter). Bolivia later demanded that retail outlets and refineries also be turned over to YPFB (OGJ Online, May 23 and 30, 2006). Petrobras owns two refineries in Bolivia and 25% of its retail outlets.

Brazil drops pipeline
Brazilian Gas Transport Co. responded by canceling bidding for contracts to expand the 3,150-km Bolivia-Brazil pipeline (OGJ, June 5, 2006 newsletter). The line represents a major section of the proposed 10,000 km Southern Gas Pipeline proposed by Venezuelan President Hugo Chávez to link South America from Venezuela to Argentina, with about two thirds of it crossing Brazil.

Brazilian Foreign Relations Minister Celso Amorim said the pipeline would not be feasible without Petrobras's participation.

According to press reports, Soliz Rada asserted that Bolivia would not accept Petrobras's participation in the pipeline project because the Brazilian company is controlled by transnational capital.

"If Petrobras does not participate in the Southern Gas Pipeline," responded Amorim, "there will be no Southern Gas Pipeline. Or else it will have to make such a big detour that it will turn into the Western Gas Pipeline."

Petrobras Pres. Jose Sergio Gabrielli said Petrobras intends instead to invest $6 billion in a domestic gas pipeline system by 2008 to improve shipments to the north, northeast, and southeast of the country.