Gas Market Needs up to US $30 billion for Development

Brazil needs US$20bn-30bn investment to develop its natural gas market, local press reported federal energy giant Petrobras's natural gas operations head Ildo Sauer as saying.

Gas market development includes four categories. Exploration and production, along with imports, will need US$2bn-3bn; transport infrastructure will need US$5bn; distribution networks will need US$10bn-15bn; and further investment will be needed in end-user equipment, and would be the responsibility of state gas companies. With these investments, natural gas could be provided to 20 million households, benefiting 70 million people. Investments in 100 technology projects supporting state distributors in 2004 amount to 35mn reais (US$12.1mn).

Petrobras estimates that potential demand for natural gas outside of thermoelectric power plants totals more than 80,000 cubic meters/day, more than double the current demand. "We need to aim at the industrial market, large-scale commercial market with an emphasis on congeneration and the urban vehicle market substituting gasoline with natural gas," Sauer told BNamericas. One project is the "virtual" natural gas pipeline that transport CNG and LNG by road 200-300km to areas that lack access to gas networks, he said. Three technologies that could be employed for CNG are the Fiba, Neogas and Galileo systems. "In one to two months a pilot project offering LNG to the Sao Paulo region will be launched," he said. The investment amounts to US$35mn.

Petrobras is also studying the use of natural gas in its own operations substituting other fuels. The company's own consumption is estimated to account for 15-25% of Brazil's gas market, large-scale industrial and commercial users 40-50%, vehicles 15-25%, and the residential sector 5-15%.

Interest in developing the country's natural gas market increased after estimates of reserves in the Santos Basin, off the coast of the industrial state of Sao Paulo, rose to 420 billion cubic meters, up from initial estimates announced in April of 70 billion cubic meters. Executives said estimates could rise even more as productivity studies continue but reserves will only be proven in a few years. Based on the new discoveries, Petrobras president Jose Eduardo Dutra said the company is planning to make a public offer of US$2bn in non-voting preferred shares to finance production. Sauer also said that federal development bank BNDES supports expanding the country's gas market, but the private sector is also expected to kick in least US$10bn.

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