UPI
Brazil, China Sign Pipeline Deal
By Carmen J. Gentile
Apr 21, 2006

RIO DE JANEIRO, (UPI) -- Brazilian and Chinese gas interests have inked a deal to build a multimillion dollar gas pipeline that will provide Brazil's impoverished northeast with much-needed fuel and further trade ties between the two of the world's leading developing nations.

Brazil's state-run gas and oil company, Petrobras, and its Chinese counterpart, Sinopec, signed a $239 million agreement earlier this week to build a relatively short expanse of pipeline -- about 180 miles -- through the eastern states of Rio de Janeiro and Espirito Santo that will link up with 800-mile section of gas lines being built or in the planning stages that stretch into the northeast.

The project, dubbed Gasene, will be designed and built by Sinopec and is scheduled to be completed in 15 months, said Petrobras officials.

The line reportedly will be able to carry more than 700 million cubic feet of gas per day to Brazil's most impoverished region, reducing the country's dependence on neighboring Bolivia, Agencia Estado news agency reported.

Bolivia's new president, socialist labor activist Evo Morales, is planning a significant price increase for gas export to Brazil, prompting Brasilia to improve gas production and distribution at home.

Ildo Sauer, Petrobras' director of petroleum and gas, said the pipeline will help alleviate the gas deficit in regions like the northeast.

"It (the pipeline) will serve to consolidate Brazil's gas pipeline grid, allowing us, in the medium-run, to move gas between the various regions of the country, sending it from where it is produced to the regions that need the gas," Sauer said.

He also mentioned the possibility of Petrobras' importing liquefied natural gas, thereby allowing gas to be transported within the country without the need to depend on pipelines for proving gas to Brazil's more remote states in the west.

"What was approved is for us to study this possibility, but there is still nothing concrete," he said.

The Sinopec deal falls in line with Brazil's recent efforts to bolster economic ties with China and other leading developing nations such as India. Since assuming office in 2002, Brazilian President Luiz Inacio Lula da Silva, a former metal worker and union leader, has nurtured Brazilian-Sino trade relations in efforts to reduce the country's dependence on trade with the United States.

Meanwhile China's hand in the construction of the Gasene pipeline is part of its own initiative -- both at home and aboard -- to broaden its influence in the world gas market.

"It also helps that Chinese contractors tend to do the work on their projects," George Beranek, a PFC Energy manager in their gas group, told United Press International.

Domestically, China is a growing importer of Liquified Natural Gas.

Currently, there is a proposal to pipe natural gas from the Karachaganak gas field to the future Kazakhstan-China gas pipeline. However Kazakh officials said this week that it is not be ready to deliver the gas China requires.

China is flexing its diplomatic muscle in the field of energy. It needs oil and gas to boost its rapidly expanding economy and has tied up with countries such as Sudan, Iran and Syria - which all have frosty ties with the United States - for energy supply. The moves give China not only leverage in these nations, but also diplomatically with the West, which has ongoing disputes with Khartoum, Damascus and Tehran.

In other news, Petrobras is also reportedly set to announce on Friday that Brazil has reached self-sufficiency in petroleum with the operation of its latest off-shore oil platform, which will add over 180,000 barrels of oil per day.

In March, Petrobras reportedly produced 1.75 million barrels of oil per day.

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