Alexandre Rocha
São Paulo – After Brazilian oil company Petrobras discovered immense natural gas reserves in Santos Basin, off the coast in the southeastern state of São Paulo, the state government wants to seriously increase gas participation in energy generation in Brazil. State governor Geraldo Alckmin and various secretaries met representatives from the productive sector and the federal government yesterday (29), with the objective of starting talk for an increase of use of the fuel in homes, family cars, urban transport, industry, petrochemical industries, and thermoelectric generators.
"The event aims at promoting changes in Brazilian energy generation, starting by São Paulo state," stated the state science, technology, economic development, and tourism secretary, João Carlos Meirelles.
The field in Santos Basin has at least 413 billion cubic metres of gas but, according to Meirelles, new estimates show that the total may be as large as 1 trillion cubic metres.
In Brazilian energy generation, according to the state government, natural gas represents just 3%, whereas in Argentina and Europe the percentage is 20%, and in the United States 25%.
Advantages
In the evaluation of São Paulo state governor Geraldo Alckmin, the use of gas can bring a series of advantages, such as an increase in industry competitiveness, the replacement of imported material in the petrochemical sector, and a reduction in pollutant emission, especially in the large centres.
As an example, Meirelles stated that ceramic factories in the interior of the state of São Paulo, which use gas, can sell their products 30% cheaper than those who use other fuels.
Another example of price reduction was mentioned by the Mines and Energy Ministry petroleum, gas, and renewable fuel secretary, Maria das Graças Sílvia Foster, who also participated in the meeting.
According to the secretary, a study by the City Ministry shows that the average city bus ticket prices in Brazil are US$ 0.43. With the use of gas-powered vehicles, the price could drop to US$ 0.39, estimates the Mines and Energy Ministry.
Maria das Graças said the federal government is working hard on developing a national natural gas policy. According to her, such a policy is essential to transform "the volume discovered" in Santos Basin in effective and useable resources.
In turn, environment secretary José Goldemberg has been asking carmakers to produce cars and buses ready for the use of natural gas as a fuel. "The situation in the metropolitan region of São Paulo has improved, but it can improve much more with a fleet of gas powered buses," he stated.
Meirelles also stated, however, that the government intention is not to completely replace other forms of energy generation for gas. The government intends "to include an energetic product and add value to what the state produces," he said, referring to the Santos Basin reserves, to existing infrastructure, and to technologies for use of gas that are already known to companies.
The idea, according to the secretary, is to provide greater "flexibility" in the use of energy sources and replace some, such as diesel oil. "Diesel oil is the correct fuel to be replaced as it is imported," he stated.
Consumption and export
According to Maria das Graças, daily consumption of natural gas in Brazil is 35 million cubic metres. Among the possible investment, she included the construction of over 5,000 kilometres of gas pipelines, to be added to the current 8,500 kilometres already existing.
Maria das Graças also pointed out that, apart from boosting internal consumption, the Santos Basin reserves can transform the country into a great exporter of the product. "The field discovered in Santos Basin makes Brazil very prominent," she stated. The secretary also added that the United States, the largest natural gas consumer in the world, only has gas reserves for another nine years and has already included Brazil in the list of possible suppliers.
The state energy and hydric resource secretary, Mauro Arce, however, recommended caution in this point. To him, Brazil cannot enter the gas business with the mentality of a commodity exporter. "It is essential to develop the domestic market," he said, pointing out that the country needs to work hard on selling products made using gas as an energy source and manufactured products that use gas as fuel, such as cars.
The state of São Paulo is itself responsible for the consumption of 11 million cubic metres of the product and, according to Meirelles, may reach the total of 30 million cubic metres up to 2010. The expectation, according to the secretary, is that in four years time a total of 55 million cubic metres of gas will be generated in Santos Basin every day.
"It is necessary to supply an already existing but repressed demand," stated Meirelles. This was one of the main objectives of the meeting, to provide an incentive for businessmen to use gas as an energy source, or to produce gas powered vehicles.
Repercussion
The state government intentions were fairly well received by businessmen, but demands for tax reduction on products that use gas as a fuel and reduction in gas prices were also made. Nowadays a large percentage of the gas available in Brazil comes from Bolivia, which is more expensive than the domestic product.
Currently, according to the state government, Bolivian gas is traded for US$ 3.37 per million BTU (British Thermal Unit, the international measurement for product quotation) and the domestic product goes for US$ 2.88. According to Meirelles, mines and energy minister Dilma Rousseff has already promised to reduce the price to US$ 2,70. But, to him, this value is still high. According to the São Paulo state government proposal, presented in recent meetings between the governor, the minister, and Petrobras president José Eduardo Dutra, the ideal price would be around US$ 2,00.
"Petrobras wants to see consumption rise before reducing prices, and we want the price to drop before we increase consumption," stated Alckmin. Meirelles added, however, that minister Rousseff is "sympathetic" to the state government proposal.
The industrial infrastructure director at the Federation of Industries of the State of São Paulo (Fiesp), Pedro Krepel, also asked for price reductions. "We must be in favour of this effort. But there is space for daring with regard to prices, which will certainly bring new opportunities," he said.
The president of the Brazilian Natural Gas Distributors Association (Abegas), Romero de Oliveira e Silva, said that national planning is essential for the gas sector and pointed out that the Mines and Energy Ministry has already been making an effort in this direction. "São Paulo moves the balance due to its size, but it is necessary to push for these objectives in an organized manner, not wasting the effort, nor allowing the results to be restricted to the state of São Paulo," he said.
Meirelles pointed out, however, that the state government is not only thinking about São Paulo. "We are thinking about São Paulo as a model for development throughout the country," he declared.
Investment
Apart from the investment necessary for extraction and refining of the Santos Basin gas, in the hands of Petrobras or of third party service companies, if demand rises, it will be necessary to make serious investment in an expansion of the distribution system. This will total "billions of dollars," explained Meirelles.
Edson Real, a director in gas sector multinational El Paso, said that estimated investment in gas production and transformation would have to be around US$ 5 billion.
In the opinion of governor Alckmin, however, the sector has the funds for investment. According to him, Comgás, a gas distributor controlled by British Gas and Shell, has, alone, invested around US$ 250 million in their distribution system since 1999. According to company financial director Roberto Lage, more investment for the around US$ 450 million is forecasted in coming years. Lage added that in the year of 2000 there were 20 natural gas refuelling stations in the state. Today there are 210 and it is estimated that this total will be doubled in coming years.
The president of petrochemical company Unipar in turn stated that "gas powered petrochemical companies are what is most competitive in the sector worldwide."
Meirelles added that projects in the area will certainly have federal government and Brazilian Development Bank (BNDES) support.
The state governor also said that Petrobras extraction may also be done through public-private partnerships. Meirelles added that investment may be both domestic and foreign, as foreign companies in the sector are already operating in Brazil. He said that gas transport does not necessarily have to be through gas pipelines, it can also be "virtual", i.e., in compressed cylinders.