Petrobras Bides Political Time for Gas Proposal

Brazil's federal energy company Petrobras (NYSE: PBR) is waiting for the right political moment to deliver a new gas purchase proposal to Bolivia's government.

"Before the worsening of the political situation in Bolivia, we were close to concluding a written proposal with Petrobras that would be taken to Bolivia for the first time. It is a very well-worked proposal asking for a price reduction and flexibility in the take-or-pay system," said Maria das Gracas Silva Foster, secretary of oil, gas and renewable fuels at the mines and energy ministry.

Speaking to reporters at the UK-Brazil chamber of commerce (Britcham), Foster said that the written proposal is ready and that Brazil is waiting for the right "political space between the two countries" to submit it. Foster did not elaborate on the proposed changes, but said that Brazil wants to "work with a gas price that is compatible with the reality of our fuels." Brazilian officials have been pushing for changes in prices and volumes because local demand for natural gas has been lower than expected.

One of the main issues is the take-or-pay clause in the bilateral contract by which Petrobras must pay for a minimum 24 million cubic meters a day (mcm/d), even though local consumption only stands at 19mcm/d. The secretary denied that credits to Bolivia from national development bank BNDES are part of the proposal. She also denied news reports about the possibility of exporting Bolivian gas from Brazilian ports to the United States. "The government has not sat down internally to discuss the it," Foster said. "We have never been so careful and more concerned about our relations with Bolivia," the secretary said.

Volumes in the Bolivian-Brazil gas pipeline have increased this past week to 18mcm/d from some 13mcm/d because of the Canoas and Tres Lagoas thermoelectric plants starting up, she said. During her speech at Britcham, Foster said that the government is working to develop the country's gas and oil markets in line with national development, creating jobs and protecting the environment. Executives and others present were pleased with the government official's commitments to develop a competitive market in the oil and gas sectors, as well as the importance that oil regulator ANP will play in their development.

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