BNDES Details US$1.2bn Petrobras Gas Pipeline Project

Brazil's national development bank BNDES has approved loans totaling 830mn reais (today US$288mn) towards a US$1.2bn natural gas pipeline expansion plan for federal energy company Petrobras, BNDES said in a statement.

Executives at Petrobras's transport unit, Transpetro, were not available for comment when contacted by BNamericas. BNDES abandoned plans to lend the money through Brazilian banks because they were demanding a spread of four percentage points, BNDES financial manager Roberto Timotheo da Costa told Valor Economico. "If it is about managing the Petrobras risk, we'll keep it ourselves," Costa said.

Although he did not name the banks involved, Banco do Brasil, Bradesco, Itau and Unibanco have been in talks with BNDES, according to previous BNamericas reports. The Japan Bank for International Cooperation will provide about US$400mn of the financing, BNDES' statement said.

Petrobras wants to expand its natural gas pipeline networks in the southeast and northeast of the country. To avoid taking on the full cost of the project directly, it has reached an agreement with Japanese firms to provide the financing and build the pipelines, while it will purchase capacity from the pipelines once they start operations.

Two new companies have been created to build and manage the pipelines systems: Nova Transportadora do Nordeste (NTN, for the northeast) and Nova Transportadora do Sudeste (NTS, for the southeast). These two companies will be owned by Japanese trading firms Mitsui & Co. (40%), Itochu Corporation (30%) and Mitsubishi Corporation (30%). Japan's Toyo is expected to be the lead contractor on the project. It has already placed an order worth US$100mn with Brazilian tube manufacturer Confab.

The project was originally designed to meet expected demand from thermoelectric power plants, as the government strove to build 54 plants to beef up the power grid. With the collapse of that program, the pipeline projects have been redesigned to target industrial customers, although thermo plants will still play a part, BNDES said. Petrobras expects natural gas sales to thermoelectric plants to reach 25 million cubic meters (mcm/d) by 2010, double the current sales, BNDES said. The NTS project will deliver natural gas from Bolivia to Rio de Janeiro state and Minas Gerais. This requires construction of a new pipeline between Campinas in Sao Paulo state and Japeri in Rio de Janeiro, and a branch to Betim in Minas Gerais, as well as construction of ten new city gates and one compression station. Petrobras is delivering more natural gas from Bolivia instead of using natural gas currently being flared or reinjected in the Campos basin. The NTN project is designed to boost natural gas supplies from fields in Bahia state to markets along the northeastern coast as far north as Ceara state. It requires construction of seven new pipelines totaling 962km, eight new city gates and two compression stations in Bahia state. Part of the supplies is targeted at new thermoelectric plants in Pernambuco and Ceara states. Brazil has 7,800km of natural gas pipelines, compared to 12,500km in neighboring Argentina and 450,000km in the US, BNDES said.

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