Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities

Year 1-No3
Jul/Aug 1997

Main Page
Economic Alchemy
Energy Sector highlights
Brazilian Proposal for Kyoto
BEB 1997
e&e Team

Edição Gráfica:
MAK
Editoração Eletrônic
a
marcos@rio-point.com
Revisado:
Saturday, 14 February 1998.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

1- Internal Offer of Energy
2 - Electricity Sector
3 - Natural Gas Sector
4. Petroleum Sector
5 - Mineral Coal Sector
6 - Economic Growth and Consumption of Energy
7 - Investments in the Energy Sector
8 - Main Business Opportunities.

ENERGY SECTOR

HIGHLIGHTS OF 1996 AND OPPORTUNITIES FOR BUSINESS

Brazilian Ministry of Mines and Energy - MME
Contacts: João Antônio Moreira Patusco
patusco@mme.gov.br
English Version:
Frida Eidelman
frida@password.com.br

1- Internal Offer of Energy

Approximately 59% of 229 million tons equivalent of petroleum (tep) of energy offered in Brazil in 1996 was clean and renewable. This is due to the Brazilian effort to develop hydroelectric power generation since 1950 and to the considerable participation of biomass in the Brazilian energy matrix, which includes the ever growing use of sugar cane products ( bagasse and alcohol fuel). On the other side, PETROBRÁS - Petróleo Brasileiro S A, since the start of the eighties, was successful in the exploration and production of oil, guarantying the regular and reliable supply of petroleum products and reducing significantly the external dependence on these products, around 48 % today.

Presently, the government stimulates the increasing participation of natural gas in the energy market and promotes a better use of unconventional energy sources and/or energy decentralization ( solar, eolian, agricultural and forest residues, vegetal oils, small hydraulic potentials), the latter aiming mainly at the supply to isolated and unassisted communities and the development of rural areas. The programs to motivate raising the energy efficiency level in the country, including production and efficient use of energy and electric and thermal power cogeneration are being strongly stimulated by the government and will influence the national energy matrix in the medium and long terms.

Brazil is acting firmly in regulating the energy sector, opening opportunities for the private sector concerning the necessary investments and the responsibilities to guaranty the national supply. In this transition phase and in spite of the high level of growth of energy supply, the country has not faced yet limitations on energy supply or deterioration of services in this area.

2 - Electricity Sector

Starting in the fifties, the Brazilian states began to create their own electricity utilities. These utilities substituted progressively the foreign companies that existed at the time. This policy was later followed by the federal government and was consolidated by the creation of ELETROBRAS in 1963. Since then, the installed capacity grew dramatically up to 57 GW in December 1996, excluding the auto-generation, with 3.5 GW. The current public generation is divided among federal (44%), state and municipal (25%) utilities, Itaipu (28% - including 13% of the Paraguayan part) and the private sector (3%). Hydroelectricity represents 93% of the total offer.

The internal public generation of 274 TWh in 1996, to which 37 TWh - from the Paraguayan part of Itaipu - was added, permitted to satisfy a total demand of 261 TWh (4.6% superior to that of 1995), with the following participation in the distribution market: state-owned concessionaires - 85% and private concessionaires - 15%, including in the latter LIGHT, ESCELSA and CERJ, recently privatized.

The transmission of the generated energy to the consuming market is made basically trough two interconnected systems. One system integrating the north and northwest regions with lines of up to 500 kV, connecting the Tucurui UHE to the plants of the São Francisco River and the other one that integrates the south, southwest and center-west regions with lines of 345/440/500 up to 750 kV, besides the direct current links in 600 kV.

In terms of service, most of the Brazilian municipalities have today regular and reliable electricity services. Nevertheless, in spite of the fact that more than 90 % of the residences have electricity, part of the extended Brazilian territory is not yet covered by the transmission network. The north region presents the largest problems of electricity supply in the country, where localities are still supplied by isolated, inefficient thermal generation using diesel oil. This opens a large market for private investors interested in the segment of small and medium size generation, specially for projects that use decentralized energy sources (for example, photovoltaic, eolian, biomass and small hydraulic plants).

For this purpose, the Federal Constitution was modified in 1995, eliminating restrictions so that foreign investors may apply capital in the energy sector. The Laws 8987 and 9074/95 (new Laws of Concessions), introduced deep and important modifications, specially in what concerns bidding on concessions of new generation undertakings; the creation of the Independent Energy Producer free access to transmission and distribution systems and the liberty for the large consumers to choose their energy suppliers. The Decree 1717 established the conditions and made possible the postponing and regrouping of public services concessions and the approval of Plan for Conclusion of the paralyzed works. The Decree 2003, published in 1996, regulated the conditions for the actions of Independent producer and auto-generation.

New regulations were established in 1996, with emphasis on the creation of the National Agency for Electric Energy - ANEEL, by the Law 9427. This new regulatory body for the sector, with autonomy and administrative flexibility will succeed DNAEE, aiming at giving stability in the transition phase as well as safety to investors and consumers. Therefore, other adjustments will happen in the institution together with its privatization.

In this panorama, aiming at improving the transformation process occurring in the electricity sector, the Ministry of Mines and Energy through its Secretary of Energy and with resources of the World Bank-BIRD, is carrying out the restructuring of the electric power industry, whose consolidation will be implemented with the privatization of the federal and state assets and the establishment of new agents who will perform the integrating and regulatory functions in the new electric sector.

3 - Natural Gas Sector

The government has been adopting a rather aggressive policy for natural gas. Accordingly, the country has already 11 state distribution companies for natural gas, including Rio-Gas, a subsidiary company of CEG/RJ, created in 1996 in order to supply to areas not served by CEG. Some states are already regulating the new constitutional rules for piped gas as a consequence of the 1995 amendments to the Federal constitution that opened the sector to private initiative.

Continuing the actions in order to amplify the share of natural gas in the Brazilian energy matrix, several events took place in 1996 such as: the effective implantation of the Bolivia-Brazil gas pipeline was started; contracts for buying and selling Bolivian gas were signed by state gas distribution companies; an agreement signed by ELETROBRAS, ELETRONORTE and PETROBRAS established the basis for using natural gas for generating electricity in the legal Amazon region ( Urucu project); in Ceara a contract was signed for supplying gas during 20 years to the Complexo Siderurgico de Pacem; a protocol of intentions was signed with the government of Rio Grande do Norte to supply gas to the Polo Gas-Sal from Macau; studies on the viability of importing gas from Argentina trough Yacimientos Petroliferos Fiscales(YPF) aiming at complementing the markets in the Brazilian south and southeast regions are being conducted; the pipeline connecting Rio de Janeiro and Belo Horizonte has been concluded; studies for the consolidation of pipelines in the northeast region connecting Salvador-BA to Rio Grande do Norte, to be extended up to Fortaleza-CE are being conducted.

In 1996 the proved exploitable reserves of natural gas reached 158 billion cubic meters ( m 3) equivalent to 17 years of the average annual production which was 25.2 million m 3 per day (13.5% superior to that of 1995)

4. Petroleum Sector

Since 1979, the country has adopted a very pragmatic energy plan so as to reduce the share of oil imports in the commercial balance. The main characteristics of the plan were: i) increasing the national oil production; ii) partial substitution of oil by alcohol; iii) substitution of oil by electricity, coal and biomass and iv) energy conservation. These measures together with successful prospecting in deep waters of the ocean platform by PETROBRAS contributed to reducing the external dependency on oil from 85% (1979) to 43% in 1985. In 1986, when oil prices returned to their values of 1978, the national alternative energy sources lost competitiveness , reverting the curve of oil dependency reduction that reached 48% in 1996.

The petroleum sector in Brazil due to the Constitutional Amendment n° 9 of 09/11/1995 integrates itself in the new institutional and regulatory reality where companies constituted under Brazilian law will be able to compete in all segments of this important activity. This new situation will allow for significant opportunities of progress for PETROBRAS ( amplification of new business and greater entrepreneurial autonomy) as well as for partners and other investors.

PETROBRAS’ capacity to explore successfully future business opportunities results from competence accumulated along its existence. One can emphasize the high capacity of its technicians and workers, the mastering of the high advanced for oil exploration and production in deep waters and the operation of a refinery park and a transport infrastructure with costs comparable to the most efficient refineries in the world.

The present administration does not intend to privatize PETROBRAS but any national or foreign company is apt to associate with it in equal conditions. Alternatively, it will be able as well to pledge for concessions of any activity in the petroleum and natural gas sectors, competing with further interested companies.

Among the articles of the Constitutional Amendment n° 9 there is one concerning the creation of the National Petroleum Agency, the regulating body for the sector which will permit PETROBRAS to develop exclusively entrepreneurial activities.

In 1996 , new oil fields were discovered, 6 on land and 13 in the sea which will total an estimated recoverable volume of about 1.95 billion bbl oil equivalent, one of the best PETROBRAS’ exploratory results . Among the findings on land those of São Mateus and Rio Copacá, in the Solimões Basin have opened new exploratory perspectives for this basin. As to the sea fields, one could emphasize that of Roncador, drilled at the Campos Basin, 1853 meters in deep water, whose preliminary estimations have proved the existence of 1.4 million bbl of good quality oil.

In December 31,1996, the total reserves in Brazil reached 14.1 billion bbl of oil equivalent ( sum of oil, NGL and natural gas) which represents an increase of 28% relative to December 31,1995. Of this total, 11.6 billion of bbl correspond to oil and NGL According to the Reserve Code of PETROBRAS, the proved exploitable reserves of oil and NGL reached 4.9 billion bbl.

The national oil production (including that of schist) and natural gas liquids (LGN) reached the average of 809 thousand bbl per day (bpd), 13.1% superior to the average production of 1995. Of the total production, 74% were obtained from the sea, from 78 platforms of fixed production and 15 from floating ones. The national record was established in November 13, 1996, with 909,549 bpd.

The net expenditures with imports and exports of oil and oil products reached US$ 6,1billion in 1996, corresponding to an imported net volume of 47,3 million cubic meters (815 mil bpd), of which 28,7 million cubic meters of raw oil. The dynamism of the regional trade, considering its beneficial effects, has influenced the import of raw oil from Argentina (139 mil bpd), an increase of 32% relative to 1995. From Venezuela, 75 mil bpd were imported, an expansion of 6%.

The internal demand of petroleum products in 1996 reached the average of 90.2 million cubic meters (1,554 mil bpd), 6.5% above that of 1995. In September 1996, it was recorded the average daily load of 1,448 mil bbl in PETROBRAS’ refineries.

At the end of 1996, the pipelines network in operation had 11,112 km, of which 6,848 km of oil and other products and 4,264 km of gas. Of this total, 1,606 km were incorporated in 1996 ( pipeline Parana-Santa Catarina - 263 km, pipeline Madre de Deus-Jequie-Itabuna-388 km and pipeline São Paulo-Brasilia-955km). As to storage capacity, it reached 9,098 mil cubic meters, distributed all over the country, of which 5,416 for petroleum products and alcohol and 3,683 mil for raw oil.

5 - Mineral Coal Sector

The mineral coal industry started its activities in the country about 140 years ago and did not follow the economic expansion, mainly because the Brazilian coal have a low calorific power, excessive fly ashes and high sulfur content, which demands costly processing which makes it non-competitive vis-à-vis other energy sources. These limitations may loose their importance in the face of existing or newly-developed technologies, more appropriate for its direct burning, dispensing with the processing step that was used in the past when thermal generation was associated with the production of metallurgical coal.

Until 1975, mineral coal participated with 3.2% in the national energy matrix destined mainly to be used in iron production ( about 80% of the total). From 1975 on, its industrial use increased due to the comparative advantages relative to combustible oil and due to the transport subsidies, decreasing from 1986 on when oil prices have decreased.

Presently, the participation of mineral coal in the country’s energy matrix is 5.3% of which 1.0% of national coal and 4.3% of imported metallurgical coal and coke. Of the national production, a little more than 5 million yearly tons, 60% is consumed in thermoelectric plants and 40% in industry.

In 1996 , with an installed capacity of 1,056 MW of (public) electricity generation using mineral coal, 4,054 GWh were generated and 3,507 mil tons of coal were consumed. In the indicative planning of the electric sector, to the present installed capacity of thermal plants using mineral coal it will be added 1,400 MW (4 plants of 350) until the year 2005. The Jorge Lacerda IV-SC, Jacui-RS and Candiota III-RS plants will use conventional burning and a fourth one will preferably use new technology.

The future of mineral coal thermoelectricity in Brazil will gain a new impetus with the privatization of the electric sector and the amplification of thermal generation limits, but its competitivity is intimately linked to the use of new technologies of run in mine coal clean combustion. In spite of the proved viability of several technologies, including the burning of low quality coal, none of these technologies has yet been applied to the coal available in Brazil. With this purpose, the Ministry of Mines and Energy is formulating in cooperation with the United States Department of Energy-DOE a policy that will permit correction of the market imperfections observed in the mineral coal area and offer to private investors new options of thermal generation on competitive basis with long term marginal costs of electricity generation.

6 - Economic Growth and Consumption of Energy

In the period 197/1980, the Brazilian Gross National Product (GNP) grew at an average rate of 8.7% annually and the energy consumption grew also at a considerable annual rate, namely, electricity 12.4% and petroleum products, 8.3%. The determining factors for this result were: the continental dimension of the country, the predominance of road transportation and additionally the development of basic industry and infrastructure to satisfy the unfulfilled needs of many regions of the country. In spite of the high indexes of electricity and petroleum products consumption, the Energy Internal Offer- EIO grew 6.5% annually - elasticity of 0.75 relative to the GNP- due mainly to the biomass growth (0.4% annually), constantly substituted by petroleum products (LPG and fuel oil).

From 1980 on, under the weight of the economic recession setting of the country, these rates declined and varied considerably. In the period 1980/1992, the economy of the country grew at an average rate of only 1.3% annually, with rates varying between - 4.3% in 1981 and 7.8% in 1985. The growth rate of energy consumption also decreased but in the same proportion as the GNP. The EIO grew 2.8% annually with elasticity of 2.1 relative to the GNP. Electricity consumption grew 5.4% annually due mainly to expansion of electricity-intensive industries (aluminum, iron, cast iron, etc.). As to the consumption of petroleum products, due to substitution policies, it grew only 0.9% annually and the biomass consumption, 1.1% annually, the latter superior to that verified in the seventies/eighties due to the alcohol program.

In the last years, with stabilized economy under the present administration, a new development cycle has been established which has a high expansion rate for economy and electricity consumption. In the period from 1992 to 1996, the GNP grew 4.2% annually and the EIO grew 4.3% annually. In the same period, petroleum products presented an average growth rate of 4.9%, electricity 4.6% and biomass 1.4%, corresponding, respectively to elasticity of 1.16, 1.1 and 0.3 relative to the GNP.

7 - Investments in the Energy Sector

The need of investments in the energy sector until the year 2000 will be around US$ 12 billion annually of which US$ 6.5 billion assigned to the electric sector, US$ 4.5 billion to the petroleum sector and US$ 1.0 billion for gas transportation and distribution. The Brazilian government estimates that a significant share of these investments will be brought by private capital as a function of the market openness established by the new legislation and the clear and durable regulating measures.

The electric energy generation undertakings now being developed which, when finished, will add to the system 10,118 MW with investments of US$ 8,8 billion have obtained 58% of this total from private capital. The expansion program until the year 2000 will involve about 75 bidding on concesions (licitações de concessões) for new generation undertakings (» 29 GW) with associated investments of around US$ 26 billion, almost all of private origin.

8 - Main Business Opportunities

The main business opportunities in the Brazilian electric sector are connected above all to the offer of new generation undertakings to be exploited by the private initiative, to the construction of transmission systems and to the privatization of the distribution and generation assets In the first case, terms of reference were published in 1996 for the concession of 4 new hydroelectric plants and 1 for thermal energy buying to be produced by Energy Independent Producer-EIP, totaling about 1,500MW and US$ 1.3 million of investments. In 1997 about 15 biddings will be issued for hydroelectric undertakings (3,000MW and US$ 3.5 billion) and 9 for electric energy buying produced by EIP (3,050MW and US$ 2.2 billion).

The expansion of the transmission system will have in 1997/1998 important definitions regarding the interconnection of the north/northeast system with that of the south/southeast/center-west (» 1000 km of line in 500 kV; » US$ 0,7 billion) what will add to the Brazilian electric system, as a function of the hydrological diversity of the regions, the capacity to satisfy a growing load of more than 700 MW. Furthermore, new lines will be incorporated to the regional systems, to satisfy the market growth. To this contingent it should be added the projects for continental integration and those for Mercosul, through the interconnections Brazil/Uruguay (300MW), Brazil/Argentina (1000MW) and Brazil/Venezuela (200MW).

The projects defined for electricity supply to the legal Amazon region will involve the implantation of gas pipelines, liquefying natural gas and its transports in boats, thermal generation and transmission lines. For the pipeline Urucu-Coari, 270 km long, investments of US$ 230 million are foreseen.

As to the Program for Privatization of the Electric Sector, it is being carried on with the state governments in order to privatize other concessionaires such as : COELBA from BAHIA; CEEE from Rio Grande do Sul; CESP, ELETROPAULO and CPFL from São Paulo; CEMAT from Mato Grosso; ENERSUL from Mato Grosso do Sul; CERON from Rondonia; CELG from Goias; COSERN from Rio Grande do Norte; etc. and it is expected that in the near future 70 % of the Brazilian electricity market will be supplied by private concessionaires. The MME and the BNDES are signing contracts for studying the transfer of stock control of ELETROBRAS’ subsidiaries (ELETROSUL, FURNAS, CHESF and ELETRONORTE), to be followed by the isolated systems of Manaus and Boa Vista.

Other privatization processes , already accomplished or being made, involve auction to sell Nacional Energetica (UHE Serra da Mesa), the division of the UHE Cachoeira Dourada (CELG) and selling part of CEMIG’s stocks (33%).

In the petroleum sector, including the production and transport of natural gas, the new regulation opens space for private investments, associated or not with PETROBRAS.

In the distribution of natural gas, the states offer opportunities of association with its utilities. The Rio de Janeiro and São Paulo states have announced the privatization of their gas companies, CEG and Rio-Gas/RJ and COMGAS/SP.