Petrobras to Invest US$2bn in Gas Through 2007

Brazil's federal energy company Petrobras will invest US$2bn in the gas sector through 2007 to conclude 10 power generation plants and expand the country's gas transport network, Petrobras CFO Jose Gabrielli de Acevedo told reporters Wednesday.

"We will concentrate on expanding the gas market in 2004," he said. The gas and energy investments are part of US$34bn planned for all the company's activities through 2007. About US$1bn will be invested in pipelines linking the southeastern region to the energy-strapped northeastern region. Additional investment will be directed at expanding the gas transport network in the northeastern region, where a number of thermo plants are lying idle for lack of gas.

Spending in power generation will conclude construction of 10 thermo projects and allow them to be fired by either gas or oil. The company started to build them through partnerships with other companies in 2001 in a government program to make more energy available quickly in the wake of the 2001-2002 rationing. "Once this is done we will have the the whole country hooked up and then, depending on price structure, we could be delivering gas from the fields in the [offshore] Santos or Campos basin, or from Bolivia," he said.

In the Amazon region, the company is waiting for environmental licensing to go ahead with the 300km Coari-Manaus gas pipelines linking the Urucu gas wells to the city of Manaus. Gabrielli did not confirm Amazonas state government expectations that construction would start in April. Gabrielli made it clear that company wants to stop investing in power, a venture that is expected to incur 1.4bn real losses in 2004.

Petrobras will conclude the plants and take over control of some of them to eliminate disadvantageous gas supply contracts. Gabrielli expects to have acquired a 50% stake in the TermoRio plant from US company NRG by April. "It's practically settled, it's just a question of price," he said. Taking control of other plants will be studied on a case-by-case basis. Most of the funds for investments in 2004 will come from Petrobras's own cash flow, although it will also use project financing and bond issues to raise cash.

Meanwhile, the plan in 2004 is to raise US$2.5bn-3bn in financing, with debt sales being used to lengthen the company's debt.

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