Petrobras to Start Building Third Section of Gasene Pipeline in Q1 2008

Petrobras, a Brazilian international energy company, announces that in the first quarter of 2008 it is to begin work on the construction of the third section of Gasene, the Cacimbas (ES)-Catu (BA) gas pipeline. This section will be 946 kilometers long and is scheduled for conclusion in December 2009.

A start on construction work can now go ahead following the granting of the Installation License by the Brazilian federal Environmental Agency (Ibama) on December 18, and the Construction Authorization License (AC) by the National Petroleum, Natural Gas and Biofuels Agency (ANP) on December 20.

The gas pipeline finance and construction contracts were signed on Dec. 27, 2007. The equivalent of R$4.51 billion line of finance is to be granted by the National Economic and Social Development Bank (Banco Nacional de Desenvolvimento Economico e Social - BNDES). A portion of these resources will come from on-lending of a line of credit to the BNDES from the China Development Bank (CDB), a Chinese financial entity, amounting to U.S. $750 million.

Petrobras has hired the Sinopec Group to execute the work on the pipeline. The sixth largest hydrocarbons company in the world, the state-owned Chinese company is already responsible for building the Cabiunas-Vitoria (300 kilometers) gas pipeline, the second leg of Gasene, to be concluded in January 2008.

The Operations License for the first section of Gasene, the Cacimbas-Vitória (129 kilometers) stretch, was issued on Oct. 11, 2007 and has been operating commercially since November of this year. Gasene represents a milestone in Brazilian gas pipeline infrastructure. The work will ensure the connection of the gas pipeline networks in the Southeast and the Northeast regions and represents the beginning of supplies of natural gas to the domestic market from the Espirito Santo Basin.

The Cacimbas-Catu section has a capacity to supply up to 20 MMcm/d to the Northeast. This additional volume of natural gas, which will be drawn from the Espirito Santo Basin, represents nearly double the amount that the region currently consumes.