Brazil to invest heavily in gas production, LNG imports

Sept. 15, 2006
Heavy investment in Brazil's natural gas industry by state-owned Petrobras is resulting in a growing use of gas in the country's energy mix, particularly in gas-fired thermoelectric plants.

Peter Howard Wertheim
OGJ Correspondent

RIO DE JANEIRO, Sept. 15 -- Heavy investment in Brazil's natural gas industry by state-owned Petroleo Brasileiro SA (Petrobras) is resulting in a growing use of gas in the country's energy mix, particularly in gas-fired thermoelectric plants.

Gas use rose to 8.9% in 2004 from 7.7% in 2003 and underwent a further hike to 9.3% in 2005. Projections are that it will represent 11% in 2010 and 15% in 2015.

At the Rio Oil & Gas Expo in Rio de Janeiro, Petrobras's Gas and Energy Director Ildo Sauer affirmed that the company is the main investor in Brazil's gas industry and will continue to undertake increasing investments —alone or in partnership with private firms—to raise domestic production and imports of gas and to upgrade existing infrastructure.

According to Sauer, these investments and the importation of LNG will prevent a gas supply shortfall, particularly since Bolivia in May nationalized its gas sector, which exports 26-28 million cu m/day of gas to Brazil.

Demand and supply
Of the average 41.13 million cu m/day of gas consumed during January-July of this year, 2.6 million cu m/day was used for cogeneration, 24.1 million cu m/day was for the industrial sector, and 7 million cu m/day for electric power generation. Another 5.99 million cu m/day was consumed in the automotive sector, 625,000 cu m/day in the residential sector, 539,000 cu m/day in commercial establishments, and 185,000 cu m/day for CNG.

During 2006, Petrobras's average gas production has been 49 million cu m/day, of which 75% is associated gas. Sauer pointed out, however, that since 1995, the output of nonassociated gas has increased by 7.5%/year. For example, last year Petrobras produced 37.3 million cu m/day of associated gas and 10.7 million cu m/day of nonassociated gas, compared with 16.1 million cu m/day of associated gas and 6.1 million cu m/day of nonassociated gas in 1995.

Sauer estimates that by 2010, some 63.5% of gas produced will be nonassociated.

Petrobras and its partners will invest up to $22 billion in the gas chain in Brazil during 2007-11. Of this amount, about 14.9 billion will be spent on gas exploration and production. Petrobras will invest $11 billion and its partners, $3.9 billion.

Petrobras also will invest $6.6 billion in gas and energy infrastructure. Private partners will add $500 million for a total of $7.1 billion. Petrobras is working to enable importation of LNG via floating storage and regasification units and shuttle vessels. The company is investing $40 million to build an LNG terminal at Pecém, in the northern state of Ceará, which will receive 6 million cu m/day of gas by February 2009, and another $140 million for a terminal at Guanabara Bay, in Rio de Janeiro state, that would receive 12-14 million cu m/day by the same date.

Sauer estimates the regasification price at 80¢/MMbtu.

In answer to an OGJ question about the status of the 10,000-km gas pipeline project to span South America from Venezuela to Argentina at an estimated cost of $15-20 billion, Sauer said, "Petrobras was providing input about the financial and technical viability of the project, especially because some two thirds of the pipeline would cross Brazilian territory."

The director said the political will to undertake the project exists as shown by the several accords signed between Presidents Hugo Chávez of Venezuela, Nestor Kirchner of Argentina, and Luiz Inácio Lula da Silva of Brazil.

Sauer concluded that the governments of Venezuela and Argentina are involved in feasibility studies but it was too soon to make any concrete and specific statements as to if and when the project would be implemented.