Petrobras Signs Financing for US$1bn Gas Pipeline Expansion

Brazil's federal energy company Petrobras signed contracts on Tuesday worth US$1bn to finance expansion of long haul gas pipeline networks in the southeast and northeast of Brazil, the company said in a statement.

The Japan Bank for International Cooperation (JBIC) will provide US$394mn, Brazil's national development bank BNDES US$256mn and a pool of commercial banks the US$250mn with the guarantee of Nippon Export and Investment Insurance, Petrobras said. Three Japanese trading companies, Mitsui and Co, Itochu Corporation and Mitsubishi Corporation will provide equity investments to reach the total investment figure, Petrobras said.

The three companies will own two special purpose companies set up to manage the two projects: Nova Transportadora do Nordeste (NTN) and Nova Transportadora do Sudeste (NTS). Mitsui and Co will own 40%, while Itochu Corporation and Mitsubishi Corporation will each own 30% of the companies.

NTN and NTS will be responsible for raising the finance for the project as well as for the necessary investments for building the pipelines and remaining infrastructure. Petrobras will repay the investments by acquiring the new transmission capacity.

The networks project was originally prepared to supply demand from the thermoelectric power plants included in the emergency thermoelectric power plant program (PPT), Petrobras said. The main objective has now shifted to satisfying industrial demand as well as stimulating the increased use of natural gas in co-generation projects and heating or cooling purposes in the residential and commercial markets, Petrobras said. The project would also encourage consumption of natural gas in the automotive segment through a more widespread use in public transportation fleets, substituting diesel, the company said.

According to the plans, the expansion project will boost natural gas transmission capacity in the northeast region by nine million cubic meters a day (mcm/d) within the next two years, with a potential further increase to 14 million by 2012. The expansion comprises construction of seven long haul pipelines and feeder lines, totaling 962km, as well as the construction of eight city gates and the installation of two compressor stations in Candeias and Catu in Bahia state. Work should start in second semester of this year with completion forecast for mid-2005.

In the southeast, capacity will be expanded by 13mcm/d within two years. Work will focus on construction of the 442km Campinas - Japeri long haul pipeline with total capacity of 8.7mcm/d. Construction work should begin in the second half of 2003, pending an environmental license from federal environment agency Ibama, and should be concluded by January 2005.

The project also involves the expansion of the Campos Basin gas compression system. Meanwhile, Petrobras said it is preparing a technical and economic feasibility study on a new 1,200km long haul pipeline for interconnecting the southeast-northeast networks, allowing Bolivian gas reserves and Petrobras' new finds in the Santos Basin to be linked to northeastern markets.

The company is also examining the possibility of expanding its virtual pipeline system through the transportation of compressed natural gas (CNG) for consumers located within a radius of approximately 200km from the city gates, Petrobras said.

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