Natural gas, a challenge for Brazil’s energy policy

By the Potencia correspondent

Brazil is coming up with alternatives to tackle its growing energy demand. In the last decade, its population has grown considerably and is now close to 200 million. The government is in the process of developing several energy projects that are strongly supported by foreign capital. Through those projects, the Brazilian government wants to take electric power to areas where it would have been unthinkable in the recent past.

Brazil's natural resources and environmental conditions mean it is one of the best locations for investments in renewable energies, in particular wind and solar power.

This Latin American nation also has the potential to produce electric power from fossil fuels, one sources being natural gas. In 2011, Brazil’s natural gas industry experienced significant growth.

A report by the Brazilian Agency for Petroleum, Gas and Biofuel (ANP), one of the entities responsible for the country's energy policy, said that natural gas production reached 24 000 million m3 last year, a record output. Moreover, between 2002 and 2011 natural gas production increased 55 per cent.

Brazil offers great investment opportunities in gas projects. More recently state-owned company Petrobras announced it had discovered new oil and gas reserves in the Amazonian region –gas reserves usually are found together with oil reserves although it is possible to find gas deposits without oil.

According to Spanish news agency Efe, these finds were discovered by drilling a 3000 metre deep exploratory shaft in the Solimoes basin. Petrobras has revealed that the reserves will be able to produce 45 000 m3 of gas per day.

This latest discovery represents an interesting opportunity for foreign investments in the area, and it now seems that the race for Brazilian natural gas has started. One f the first big foreign companies showing interest is E.ON, the energy utility from Germany.

According to El Semanal Digital, E.ON has signed an agreement with Brazilian MPX, which has created a joint company. This new company is one of the major private companies in the Brazilian energy market today.

The agreement between E.ON and MPX not only includes renewable energies projects, but also gas projects. Eike Batista, chairman of EBX group – MPX’s parent company –  has proposed E.ON’s managing director Johannes Teyssen invests in the gas deposits found in the Northern region of the country, Financial Times Deutschland reported.

Gas investments in the largest and most populated country in Latin America are needed more than ever because the Southern region – which comprises the states of Parana, Rio Grande do Sul and Santa Catarina, where almost 30 million people live – is suffering supply problems. Argentinean daily Cronista said that the local authorities in those states are demanding that the Brazilian government devise new solutions to guarantee the gas supply.

These issues will be discussed at the Gas Summit Latin America, which is being hosted in Rio de Janeiro, 14-16 May. Among the central issues to be discussed at this summit is the optimization of natural gas production in order to achieve an uninterrupted supply for Latin American countries. In addition, the ways to strengthen LNG production will also be covered.

Gas projects expansion in Brazil is in need of foreign investment, so Dilma Rousseff's government must guarantee the legal certainty for foreign companies, which want to risk their money in Brazilian gas projects, some experts have warned.

Brazil needs to avoid at all cost repeating what is happening in Argentina. Last month, the government said it would seize a controlling interest (51 per cent) YPF, an oil company owned by Spanish firm Repsol.

For more Latin America news.



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