Petrobras to Restart Urucu-Manaus Gas Pipeline Tender

Brazil's federal energy company Petrobras (NYSE: PBR) plans to restart a tender to build the 650km, US$1.2bn Urucu-Manaus natural gas pipeline in the Amazon region, Petrobras gas and power coordinator for the northern region, Edurado Backsmann, told reporters on Tuesday.

Petrobras rejected an initial offer from a local consortium because the price was too high. "The initial price the consortium offered was four times the original price," said Backsmann.

The consortium was made up of Brazilian engineering companies Odebrecht, Condutos and Techint, among others.

The decision will delay the start of operations of the 10.5 million cubic meters a day (Mm3/d) pipeline by six months to the fourth quarter of 2007 from the initial projection of a 1H07 start, Backsmann said.

The consortium had offered a price of US$38 per meter, which was not accepted since it was significantly above the US$15/meter reference cost.

"Now we will open an international tender," said Giovanni Paiva, northern region general manager for Petrobras' transport company Transpetro, which will manage the pipeline once it is built.

Petrobras expects to sign contracts to build the 280km stretch between the Urucu field, where the gas is produced, and the town of Coari in September. The winner of the second 370km stretch, linking Coari to a city-gate in Reman refinery in the city of Manaus, should sign contracts in October, said Backsmann.

Petrobras has already bought all the tubes needed for the pipeline from Brazilian tube maker Cinfab-Tenaris.

The Urucu-Coari stretch will have a 10-inch diameter and run parallel to the existing 18-inch liquefied petroleum gas (LPG) pipeline and an oil pipeline, Paiva said.

"Once the new pipeline is ready, it will switch over: the 18-inch pipeline will carry natural gas and the 10-inch will carry LPG," Paiva said.

The stretch from Coari to Manaus will have a 20-inch diameter.

The Brazilian army started in March opening up clearings in the jungle to allow engineering teams to be flown in by helicopter to build the pipeline. The whole pipeline will be buried underground.

Initially the pipeline will carry 7.5Mm3/d, of which 5.5Mm3/d will supply gas-fired power plants in the city of Manaus. The rest of the gas will be sold by local Amazon-state gas distributor Cigas.

Urucu currently produces 10Mm3/d of gas of which 20% is used to produce LPG and supply gas processing plants. The remainder is re-injected into the ground for lack of a nearby market.

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