Economy &Energy
Year III - No 17 November-December 1999

ollaoro.gif (978 bytes)Main Page
ollaoro.gif (978 bytes)Emission of  Thermo-electric
Power Plants

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Is The Consumer Earning Market Power in Electric Sector?
ollaoro.gif (978 bytes)Petroleum  And Natural Gas In Espirito Santo
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Brazilian Energy Balance 1999

  
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PETROLEUM AND NATURAL GAS
IN
ESPIRITO SANTO

 

Genserico Encarnação Jr.
genserico@ecen.com
From the Development Agency
Network of Espirito Santo - ADERES

English Version
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Frida Eidelman
frida@ecen.com

A little bit of history

Petroleum prospecting started in ES in 1957 and the first finding occurred in 1969. It should be noted that

at that time the work that was starting at Campos Basin was also subordinated to Petrobras' Exploration and Production District whose headquarters was in Vitória. Due to the successful activities of this Basin the superintendence was divided into two parts. That of the Campos Basin was based in Macaé (RJ) and that of Espirito Santo Basin in São Mateus (ES) which supervises as well the small activities of the Campos Basin in Espirito Santo's waters. As is well known, the north portion of the Campos Basin is situated in Espirito Santos's waters extending to the so-called geological arch of Vitória.

Production started in São Mateus in 1973. The transportation infra-structure - oil pipeline and gas pipeline - started operation in 1981, while the Natural Gas Processing Unit started its activities in 1983 The first gas supply was in 1982 to Aracruz Celulose. The first gas discovery was that of the Doce river mouth in 1988, forerunner of the Peroá and Cangoá Basins. In December 1993 concession to distribute pipelined gas was granted by the state to BR- Distribuidora. In August 1996 and May 1997 new discoveries were made in the Doce river mouth. Presently the estimated reserves of the Peroá and Cangoá submarine basins are 10 billions m3.

The present situation

The present oil production is around 12 thousand barrels daily while it had been twice as much. With the incorporation of recently discovered reserves (they are now 36 million barrels), production will return to the previous plateau of 24 to 25 thousand barrels daily in the short term. This production will be drained through a pipeline to the Regência port in the municipality of Linhares were it is embarked to the refineries.

The natural gas production is around 750 thousand m3 daily of which 700 thousand m3 daily are put on the consuming market and approximately 300 thousand are used in the pelletizing plant of Cia. Vale do Rio Doce (CVRD) in Ponta de Tubarão, municipality of the capital city Vitória. The consumption distribution is the following: 54% for the steel segment; 23.9 % for cellulose; 9.8% for ceramics; 6.8%. for chemistry; 4.2% for textiles; 1% for food production and 0.2% for cement.

Gas comes from the producing region in the north of the state by gas pipeline to the municipalities of Great Vitória. A branch gets around the island and leaves the Serra municipality carrying gas to Viana and Cariacica municipalities in the south part of the capital boundary, close to Vila Velha municipality.

Natural gas reserves are 12 to 13 billions m3.

When did the future started?

In March 1997, in a ceremony at the Presidential Palace an agreement between ADERES, Petrobrás and CVRD was signed aiming at studying the construction of the Caiúnas (RJ) - Vitória (ES) gas pipeline, due to the perspective of a larger production of natural gas in the Campos Basin in the State of Rio de Janeiro waters. According to engineering studies carried out by Petrobrás, this gas pipeline will have an extension of a little over 300 km and transportation capacity of 7 million m3 daily, with investment as high as US$ 123 million. Its viability is guaranteed by the use of natural gas in an electrical power station in the Vitória region, in a CVRD's FERRO ESPONJA plant and in substituting oil for gas in 7 pelletizing plants of CVRD and its associates.

The preliminary contacts between CVRD and Petrobrás started around 1995 and at the time when the agreement was signed, there was a real indication of viability. Nevertheless, the privatization of CVRD, on one hand and the administrative changes at Petrobrás delayed the negotiations. More recently an agreement was signed creating a tripartite consortium (CVRD, Escelsa and Petrobrás) to study the viability of constructing the Vitória Thermoelectric Power Plant that will consume 2 million m3 daily of natural gas when operating in its full capacity of 500MW.

Other points of consumption in the gas pipeline route, besides those already mentioned, would be the substitution of fuel oil by gas in the Samarco Pellet Plant in Anchieta municipality and a consuming center in Cachoeiro de Itapemirim, mainly the local cement industry, practically situated along the gas pipeline route.

Therefore the following consumption profile could be expected for natural gas transportation in the Cabiúnas - Vitória gas pipeline (in thousand m3/day):

Vitória Thermoelectric Power Station

2.000

FERRO ESPONJA Plant - HBI (CVRD)

900

Development Agency n Network of Espirito Santo– ADERES

1.500

Cachoeiro do Itapemirim Center 400

Total (1)

4800

In what concerns the locally produced natural gas, with the recent discoveries on land and at sea (Cangoá and Peroá fields) at least the following panorama is expected for the next year (still in thousands m3/day):

Pelletization CVRD 600
Other consumers 400
Total (2) 1000

The present gas pipeline that connects the producing region in the north of the state to the Metropolitan Region of Large Vitória , with capacity of transporting 700 thousand m3/day in its main branch, is being duplicated by Petrobrás, an investment of US$ 18.5 million. Evidently there is the possibility of increasing the second total value to 1.5 millions m3/day in the medium term.

Some months after the ceremony at the Presidential Palace, another memorandum of understanding was signed in May 1977, this time in São Mateus, between Escelsa, Petrobrás and ADERES, which represents ES, in order to start the studies for another thermoelectric power plant to be built in the north of the state, with capacity then estimated to be 150 MW. For this purpose, Petrobrás would make available during 15 years 600 thousand m3/day of gas from Peroá and Cangoá fields. The undertaking would include the construction of another gas transport network from this submarine fields, 50 km away from the coast, up to the thermoelectric plant. The total foreseen investment is estimated to be US$ 173 million.

Therefore, to the above mentioned totals one could add a third one concerning the expected consumption of the North Thermoelectric Power Plant (in thousand m3/day):

North TPP(3)

600

This power plant, relative to the present reserve volume of the submarine fields of Cangoá and Peroá, could have its capacity increased to 250 MW, consuming 1 million m 3/day. This is a more economical scale than that of 150 MW. The agents involved should study this possibility

Adding the three total values, one would have a market of about 6,400,000 m 3/day.

What the future will bring

As known, the Espirito Santo coast is divided in two sedimentary basins: in the north, the Espirito Santo Basin and in the south it corresponds to the north portion of the Campos Basin

It is from the Espirito Santo Basin that comes the present production of oil and gas of the state and it was there that the Peroá and Cangoá fields were discovered, with significant natural gas reserves, not associated with petroleum, already previously mentioned. Petrobrás foresees for this basin the possibility of new discoveries of 30 billion m3 of non-associated natural gas, that could produce about 6 million m3/day during 15 years.

In what concerns the north portion of the Campos Basin, with the recent bidding of sedimentary blocks in this area, Petrobrás admits the possibility that new large reserves will be discovered that could guaranty production up to 1 million of petroleum barrel equivalent. If the production of oil and natural gas are added, this means that one could reach one million barrels. According to Petrobrás, starting at this volume one can produce up to 30 million m3/day of natural gas

The investments for this exploration activity are calculated as US$ 1 billion. Depending on the high or low success in this activity, the production works is situated between US$ 5 and 15 billion. Including Petrobrás, the following companies, alone or associated with Petrobrás or among themselves, are in the area: UNOCOL, SHELL, EXXON, AGIP, YPF, MOBIL and TEXACO, all of them internationally known.

One can not figure out what the consequences this would bring to the economy in Espirito Santo, be it as large producer of hydrocarbons (petroleum and gas), large consuming market and distributor of gas and petroleum to other regions of the country. Shipping activities would be significantly developed and evidently, refineries, gas-chemical and petrochemical centers would be built in order to aggregate value to the gas and petroleum to be produced.

The finances of the state would benefit indirectly via taxes and directly through the royalties paid at the state and municipal levels .If the estimates are fulfilled, Petrobrás calculated that the state government could receive R$ 30 million monthly, while the municipal government would share about R$ 37 million monthly.

Final remarks

ADERES represents the state government in the negotiations with the economical agents for this undertaking and it has put in its agenda the creation of a Gas Distribution Company that would take on the concessionaire role, now belonging to BR-Distribuidora, as well as the establishment of the Public Services Regulating Agency that would also be responsible for the energy business. Law already approved this Agency and it is about to be established. In the energy sector, it would regulate the distribution of piped gas, of which the state has de concession power, and together with the national regulating agencies it would be the decentralized local branch of these agencies in the state.

Therefore, the perspectives in the energy area in Espirito Santo are extremely encouraging, mainly because the consequences to the deficiency panorama (*) of electrical energy generation in the state. The natural gas reserves already discovered and those to be discovered, together with its relatively small hydraulic potential, could increase the electric power generation through thermoelectric generation, as mentioned above.

(*) The electric energy generation capacity in Espirito Santo is 200 MW and it needs 1,000 MW for its demand. In spite of its cogeneration capacity (Aracruz Celulose and Companhia Siderúrgica de Tubarão) of 200 MW, the state imports 80% of the electric energy consumed in the state.

Petroleum  and Natural Gas in Espirito Santo- Genserico Encarnação Jr. - The demand and offer of natural gas and petroleum is analyzed from the historical and prospective point of views. It is highlighted the potential of Espirito Santo in their production - with emphasis to natural gas - and absorption in the local market.