Economy & Energy
BOLIVIA BRAZIL GAS PIPELINE
REASONS FOR THE PROJECT
The idea of constructing a gas pipeline between Bolivia and Brazil has been presented in various occasions and it has been the object of discussions for almost half a century. Nevertheless, for different reasons the different projects were not viable in the past.During this period of frustrated negotiations with Brazil, Bolivia started to export gas to Argentina. But, with the significant increase of natural gas from the end of the seventies on, Argentina became self- sufficient and could do without the Bolivian gas. Negotiations between Brazil and Bolivia started to have a new direction with the end of the contract for importing Bolivian gas by Argentina in 1992(1). Bolivia depends strongly on natural gas exports and with the Argentine self-sufficiency in what concerns natural gas, Brazil emerged naturally as the main consuming market for the Bolivian gas.
We do not intend to discuss the reasons for unsuccessful negotiations between Brazil and Bolivia in the past. We will rather examine the reasons that motivated the import project presently in execution.
At the end of the eighties, natural gas imports became a social imposition, particularly in the south and Southeast regions, where the national gas availability is smaller than the potential market. It should be highlighted the initiatives of the private sector in the southern states of the country, such as the institution of INFRAGAS, an association of potential gas consumers in the states of Paraná and Santa Catarina which, even before the structuring of the Bolivia-Brazil gas pipeline, started its studies on gas imports from Bolivia and Argentina. In Rio Grande do Sul too the government and the private sector in several occasions considered the gas import from neighboring Argentine provinces. In São Paulo was instituted the Sociedade Privada de Gás SPG, having as partners some of the largest enterprises of the private sector in Brazil, including contractors, capital goods industries and banks, besides several large international enterprises of the electrical sector. The main SPGs goal was to elaborate the viability studies for the gas pipeline under the perspective of the private sector in order to guaranty the projects structure and a strategy for commercial development that could attract resources from the private sector.
At the start of this decade, as a response to societys demand, the Brazilian government concluded a complete analysis of the future energy needs of the country. The "Reexamination of the National Energy Matrix" recommended the increase of natural gas participation in the energy matrix from 2% in 1990 to at least 4.5% in year 2000 and 6% in 2010. Afterwards, the Gas Commission, created in July 1991 aiming at proposing guidelines and actions to be taken in order to make viable a larger use of natural gas, recommended to the National Energy Department to take measures for "promoting the necessary actions aiming at making technically and economically viable in the possible shorter term the import of natural gas from Bolivia in order to supply the markets of the south and southeast region states and Mato Grosso do Sul state" and also "Petrobrás should resume the studies for importing gas from Argentina, via a gas pipeline, and other sources in the form of liquefied natural gas (LNG) aiming at complementing the national offer". The Commissions report which was approved by the President of the Republic in March 1993, presented the goal of 12% participation of natural gas in the consumption of primary energy in Brazil in year 2010.
The import of gas from Bolivia presented itself as the best alternative among the options considered for increasing the offer of gas in the country, considering as well aspects of Brazilian external politics and the possibility of future integration with the gas producing fields of Argentina and that of Camisea in Peru
The Bolivia-Brazil gas pipeline now under construction had its initial milestone in the Letter of Intentions about the Energy Integration between Bolivia and Brazil of November 1991, signed by Petrobrás and Yacimento Petrol;iferos Fiscales Bolivianos (YPFB) with the participation of the Bolivian Ministry of Energy and Hydrocarbons in La Paz. In this letter the parties manifested their decision to arrive at an agreement to buy and sell Bolivian natural gas with an initial volume of 8 million m3 / day, forecasting to reach 16 million m3 / day as a function of the Brazilian market evolution and of the availability of gas in Bolivia.
Starting from this letter, the Federal Government took measures aiming at rendering the contract viable. The Buy and Sell Contract between Petrobrás and YPFB was finally signed in February 17, 1993. The contract would be in force after its signature and its effectiveness would be conditioned by the financing obtained in conditions that would guaranty the economical viability of the project.
The economical viability of the project was no simple matter, several additions to the contract of 1993 were signed postponing deadlines and also altering the volume negotiated. The priority assigned by the Government by including the project in August 1996 among the 42 undertakings considered as priorities in the sphere of governmental actions Brazil in Action Program, was an important aspect to render it viable. Nevertheless, only in July 1997, with the financial scheme already established, the contracts for constructing and assembling the gas pipeline were signed.
Natural Gas Buy and Sell Contract
The basis of the gas pipeline Project is the buy and sell contract between YPFB and Petrobrás, signed in August 1996 in which YPFB undertakes to sell and Petrobrás to buy in the take-or-pay regime increasing quantities of gas, starting with 8 million m3 / day and reaching 16 million m3 / day in the eighth year and remaining in the plateau up to the twentieth year (TCO Transportation Capacity Quantity). Still in the same contract, YPFB concedes to Petrobrás a buying option, as a preferred customer against third parties, of additional quantities of gas coming or not from new Bolivian discoveries up to the limit of 30 million m3 / day, as long as these quantities are available and are not necessary to supply the Bolivian domestic market demand (2).
Within the financial structure of the project it was created an option of transportation capacity (Transportation Capacity Option TCO) by which the buyer, paying in advance, could transport gas in a range of 6 million m3 / day above the contractual quantities paying only for the variable transport operational costs including the capital costs corresponding to investments in additional compressors to move such volume. This option became available for all partners of the undertaking until the start of the construction when Petrobrás took up this option.
The TCO negotiation also involved Eletrobrás and BNDES and it was agreed that this additional volume would be supplied to thermoelectric plants to be installed especially in Mato Grosso do Sul and São Paulo. BNDES participation was through financing the anticipated buying of the transportation capacity option. Through this financing, Petrobrás could reduce the gas transportation tariff for a volume of 6 million m3 / day intended for the thermoelectric plants considered as emergency cases by the electrical sector.
Eletrobrás Expansion Decennial Plan 1998/2007 points out to a gas consumption of 4 million m3 / day from this option. But according to an agreement among Petrobrás, Eletrobrás and BNDES for using the volume corresponding to TCO, it is expected that Mato Grosso do Sul will consume about 2 million m3 / day in two thermoelectric plants in Corumbá and Campo Grande and São Paulo will be responsible for the remaining volume of TCO (4 million m3 / day). BNDES financing of the TCO value motivated the significant increase of gas demand by the electrical sector.
In the terminology adopted by the Project, it is called TCX Transportation Capacity Extra, the capacity of transporting above the TCO volumes until attaining the maximum capacity of the gas pipeline.
The Bolivia-Brazil gas pipeline will have approximately 3,150 km of extension, of which 557 km on the Bolivian side and 2,593 km on Brazilian territory. It starts in Rio Grande, Bolivia with 32" of diameter reaching the border with Brazil in Mato Grosso do Sul (Puerto Soares- Corumbá), continuing with the same diameter until Campinas (1,258 km in the section Corumbá Campinas). From this point, it is divided in two main branches with 24" diameter. The first to Guararema (155 km), where it is interconnected with Petrobrás ducts system (São Paulo Rio de Janeiro Belo Horizonte) and the second (1,180 km), until Porto Alegre. The maximum gas pipeline capacity will be 30 million m3 / day. The gas supply will occur in 30 city-gates of which are initially foreseen four in Mato Grosso do Sul, three in São Paulo, two in Paraná, eight in Santa Catarina and three in Rio Grande do Sul(3). The compression stations will be gradually installed according to the gas volume transported until the total of 16 stations is reached, of which four in Bolivia and the remaining ones in Brazil.
The section Campinas-Guararema will make the linking with other gas pipelines already existing in the southeast region which connect the Campos and Santos Basins with consuming centers in Rio de Janeiro, São Paulo and Minas Gerais. With the establishment of the Bolivia-Brazil gas pipeline, the country will have a system of interconnected ducts of approximately 4,000 km, besides the already existing system in the northeast.
For the construction and operation of the gas pipeline two companies were constituted: one on the Bolivian side, the GAS Transboliviano S.A. GTB and the other on the Brazilian side, the Transportadora Brasileira Gasoduto Bolívia Brasil S/A TBG. Both companies have Petrobrás as partner through its subsidiary Gaspetro Petrobrás Gás S. A., (ex Petrofertil); the BTB Group, a consortium formed by Broken Hill Proprietary Company BHP, El Paso Energy and British Gas Americas Inc.; Enron (Bolivia) C.V.; Shell and Fundos de Pensão Bolivianos. The TBG has also as partner the Gás Participações S/A Gaspart. The shareholding of the two companies are presented in the following table.
The total investment of the undertaking is about US$ 2 billion, of which US$ 1.6 billion in Brazil and US$ 400 million in Bolivia. The project has financing from four multilateral agencies: International Bank for Reconstruction and Development BIRD (US$ 310 million), Inter-American Development Bank BID (US$ 240 million), Corporación Andina de Fomento CAF (US$ 80 million) and European Investment Bank BEI (US$ 60 million). Funding agencies for export credit such as BNDES/FINAME, Japans Eximbank and Sezione Speciale Per lAssicurazione del Credito allEsportazione SACE (US$ 336 million) participate also and additionally BNDES (4) (US$ 303 million).
The gas pipeline will connect the market of seven states (MS, SP, MG, RJ, PR, SC and RS).
Initially, it was foreseen that the gas imported from Bolivia would be consumed almost totally by industry. The possibility of electrical energy deficit, together with the efficiency
improvement of thermoelectric plants turned the electrical sector into a large market for the Bolivian gas.
Several projects for the installation of thermoelectric plants along the gas pipeline are being considered in almost all states. If all projects under analysis become a reality, a large part of the Bolivian gas will be used for electricity generation.
The distribution of natural gas to the consumers is a responsibility of the state utilities and gas supply contracts have been signed between Petrobrás and the following companies: COMGAS (SP), COMPAGAS (PR), SC Gás (SC), SULGAS (RS) and MS Gás (MS).
A greater penetration of natural gas in the industrial sector will depend strongly on the rhythm of implantation of distribution infrastructure by the state utilities. The potential market is higher than the gas pipeline capacity. The most conservative projections evaluate the industrial demand as 20 million m3 /day for the start of the next decade and it could reach 40 million m3 /day in a more optimistic perspective including co-generation of electricity by industry. Nevertheless, the present idea is that in the beginning, the thermoelectric plants will sustain the project, acting as an anchor for the project and later on an industrial market will gradually be developed and , as a complement, the use of gas in the automotive area, mainly in buses and taxis in the cities supplied by the gas pipeline.
Maria de Fátima Salles Abreu Passos
Brasília, September 10 , 1998
(1) Even though the import/export contract of gas between Argentina and Bolivia has expired in April 1992, Argentina continues to import about 6 million m3/day. This trade which has been occurring since 1972 is due to end with the start of the Bolivia-Brazil gas pipeline operation. It is even foreseen the inversion of flux of the gas pipeline connecting Argentina to Bolivia, which will be used to supply Argentine gas to the Brazilian market.
(2) Petrobrás has taken up the buy option of more than 2 million m3/day of natural gas, therefore the TCO volume will be 18 million m3/day in the eighth year.
(3) The city-gates locating definition is still preliminary in what concerns the so called south branch of the gas pipeline (Campinas-Porto Alegre). In Mato Grosso do Sul three citygates are being initially installed. In São Paulo, the thirteen foreseen ones are being installed. For the southern states, the distribution presented here may be modified.
(4) Financing of the TCO.