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Brazil rations natural gas due to damaged pipeline
By Jeb Blount
Bloomberg News
RIO
Petroleumworld.com 04 10 06Brazil's Energy Ministry ordered a reduction of natural gas deliveries to power generators and fuel distributors to make up for a shortfall after rains in Bolivia damaged a pipeline that supplies Brazil's economic heartland.
Petroleo Brasileiro SA, Brazil's state-controlled oil company, will cut the use of natural gas by 51 percent at refineries under a plan approved yesterday, the ministry said in a statement. Supply to natural gas distribution companies will fall by as much as 12 percent and electricity generators will see their gas supplies cut by 72 percent.
Rationing comes as tensions increase between Brazil, which gets half its gas from the pipeline, and Bolivia, which gets about half its taxes from gas exports. Bolivia's President Evo Morales wants companies such as Spain's Repsol YPF SA and Petrobras, which has invested $1.5 billion in Bolivia, to pay more for resources cede control of assets to the state.
``The situation is very delicate, very serious,'' said Luiz Caetano, an energy analyst with Banif Investment Bank in Sao Paulo in a telephone interview. ``The bottom line, though, is very simple. A quick solution is likely because both sides are dependent on the gas -- whatever the politics, the nationalism or even the weather has to say about it.''
The rationing threatens Sao Paulo, Latin America's most industrialized region the most. The city, South America's largest, and surrounding region get three-quarters of their gas from Bolivia.
Landslides
Flooding and landslides in Bolivia this week uncovered an 800-meter (2,625-foot) stretch of the Bolivia-Brazil Natural Gas Pipeline, Rio de Janeiro-based Petrobras, the pipeline operator, said in a statement sent by e-mail to journalists.
Repairs are being delayed by protests in Bolivia over the country's energy policies, which have blocked roads used by pipeline repair crews, the statement said.
``The longer this drags on, the more the Bolivians get hurt,'' Caetano said. ``Still we're going to have to be ready for more of this kind of thing because protests are likely to increase ahead of June elections in Bolivia.''
Andres Solis, Bolivia's energy minister, promised full support for Petrobras efforts to overcome difficulties it faces fixing the pipeline in a conference call with Brazilian energy minister Silas Rondeau, the Brazilian energy ministry statement said.
Pipeline Activity
The spokeswoman for Petrobras' president Jose Sergio Gabrielli declined to comment when reached today by telephone in Rio de Janeiro. A call to the Petrobras press office in Rio de Janeiro wasn't returned. A call to the energy ministry in Brasilia wasn't answered.
A call to the Bolivian presidential palace press office in La Paz wasn't answered.
As a result of the damage, pipeline activity has fallen by about 7 million cubic meters a day, 14 percent of Brazil's daily use, reducing deliveries from the Bolivia pipeline to about 19 million cubic meters a day from 26 million cubic meters, Petrobras said.
A ministry statement said that any declines in gas-fired electricity generation will be made up by increases in hydroelectric generation.
The ministry also said that all efforts are being made to reduce the impact of the shortfall on residential and business consumers of gas supplied by distributors in the main Brazilian states.
Reduction of gas use by Petrobras will also help make up the shortfall. Brazil gets most of the rest of its natural gas from the Campos Basin off Brazil's coast near Rio de Janeiro. Gas from the Campos basin can be redirected to Sao Paulo and other parts of Brazil's industrialized southeast and south through interconnected pipelines, according to Petrobras' Web site.
To contact the reporter on this story:
Jeb Blount in Rio de Janeiro at jblount@bloomberg.net
Bloomberg 04 08 06 1428 GMTCopyright © 2006 Bloomberg. All Rights Reserved.
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