MercoPress. South Atlantic News Agency

Brazil working hard for “energy independence”

Brazilian President Luiz Inacio Lula da Silva inaugurated Saturday the lay out of a gas pipeline that will connect the southeast with the northeast of the country, in another step to ensure energy independence.

"This gas pipeline is the answer. We do not want to be dependent either on Bolivia or United States" Lula said at the inauguration of the pipeline construction works in the city of Serra, next to Vitoria, capital of Espiritu Santo state.

Since Bolivia's President Evo Morales nationalized hydrocarbons resources (including Petrobras assets) Brazil has speeded up plans to achieve energy self-sufficiency. Brazil currently imports 60% percent of the natural gas it consumes from Bolivia which is transported through a 3.200 kilometers long pipeline.

The new 300 kilometers long pipeline will connect the cities of Vitoria with Cabiunas in neighbouring Rio de Janeiro state. It is scheduled to be finished by October 2007.

The projected capacity of the pipeline is 20 million cubic meters of gas per day and is the first leg of a much more ambitious project, the Southeast-Northeast Gas Pipeline, or Gasene, which will be 1.371 kilometers long when finished.

Brazil's government owned Oil Company Petrobras and China's Sinotec, after long discussions, are partners in the Gasene project.

"We had two years of hard work with the Chinese to set up this association. But now we are going to pump Espiritu Santo gas to northeast Brazil helping to create thousands of jobs, directly and indirectly", insisted President Lula da Silva. "China and Brazil have key roles to play in joint ventures" because both countries "currently are poised to develop leading positions in business, in development and trade relations", added the Brazilian president.

Petrobras has plans to invest 16 billion US dollars in the next four years to ensure a sustainable supply of domestic natural gas, of which some 5.2 billion are earmarked for new gas pipelines, including the Southeast-Northeast project.

In related news and form Sao Paulo Petrobras gas and energy general manager Ildo Sauer warned that if an agreement on the price for natural gas supplied by Bolivia to Brazil is not reached, "we will appeal to international arbitration".

"If they request a higher price than contemplated in the contract, we're going to analyze the situation and show them why we disagree. And if we can't agree we will appeal to international arbitration, a process that can involve months, years", said Sauer.

The Brazilian official described Bolivia's intention of having an automatic adjustment of gas prices every three months an "unviable pretension".

"I can't see how we can concord with such an increase. They are making ample money with the current contract, far more than they ever dreamt of".

According to Sauer when the contract was signed in 1996, Bolivia was making almost one US dollar for each BTU.

"Now they are making over four dollars. If with one dollar business was viable, and profitable, imagine with four dollars. For us is not a bad contract, but for them (Bolivia) it's far better than for us", emphasized Sauer.