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IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 1
GAS DEVELOPMENT IN BRAZIL
Henyo Barretto (Petrobras)Jean-Michel Merzeau (Total)
Pablo Ray (TGS)
International Gas Union23rd World Gas Conference
5 – 9 June 2006, Amsterdam - NL
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 2
Agenda
• Introduction
• Key Factors for Gas Development
• Outlook and Conclusions
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 3
Introduction: Brazil´s selection
• Among several considerations to select Brazil as a case study, we can highlight the following:
– Country size
– Low gas participation in the energy matrix
– Growing energy market
– Regional integration
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 4
Introduction: Countries Background
• BRAZIL – DEMAND MARKET• Area: 8,5 MM sq.km.
• Population: 186 MM• GDP/capita: u$s 8.300
• Estimated Energy Market: 181 MM TEP
• Gas Participation: 8.8 %.• Renewable Sources: 38 %• Gas Reserves: 11.9 Tcf (without recent discoveries)
• ARGENTINA – MATURE MARKET• Area : 2.8 MM sq.km.
• Population: 39 MM
• GDP/capita: u$s 4.000• Total Energy Market: 58.7 MM TEP
• Gas Participation: 53 %• Gas Reserves : 22 Tcf
• BOLIVIA – EXPORT MARKET• Area: 1 MM sq.km.• Population: 9 MM
• GDP/capita: u$s 1.000
• Total Energy Market: 6.5 MM TEP
• Gas Participation: 25 %
• Gas Reserves: 52 Tcf (proven & probable)
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 5
SWOT Analysis
WEAKNESSESSTRENGHTS• Lack of clear energy policies in all
countries:
- State / Federal rules in Brazil;
- Electricity pricing / investments;
• Significant differences amongregulatory frameworks and energyprices’ setting among the countries;
• Nationalization in Bolivia;
• Uncertain energy policy in Argentina;
• Brazil´s commitment to be selfsufficient in crude oil production:- Milestone achieved in 2006;
• Petrobras´s leading role in theenergy sector:- New gas reserves at Santos Basin;- Infrastructure development;
• Bolivia´s huge gas reserves;
• Argentina developed market andexpertise;
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 6
SWOT Analysis
THREATSOPPORTUNITIES• Volatility in gas demand due to
large hydroelectric power base;
• Considerable delay in restoration ofa stable regulatory framework;
• Lack of political and contractual understanding among countries atthe Southern Cone;
• High oil and products prices makenatural gas competitive;
• Potentially sustainable availability ofenergy sources on a regional basis/ countries synergies;
• Gas-fired thermal power plantsfinally expected to dispatch at highload factors;
• Creation of a “Gas Hub” and a “Gas Ring” at the Southern Cone region;
• Significant gas infrastructure stillhas to be built within Brazil and theregion;
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 7
• Strong Demand and even further Potential
• Adequate Regional Reserves
• Competitive and Sustainable Prices
• Government Policies
Key Factors for Gas Development
Brazil could finally develop natural gas on a massivebasis due to …
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 8
Strong Demand
• By 2004, Brazil gas demand could be grouped into four types of uses:
• Brazilian gas demand grew from less than 20 MM m3/d to 37 MM m3/d
(16.6 % compounded annual growth, period 2000/2004)
6.5 9.6
27.1
46.419.6
22.9
36.7
39.1
4.65.4
13.8
13.8
0
20
40
60
80
100
120
2003 2004 PN 2004/2010 PN 2006/10
MM
m3/
d
Power Generation Industrial Other Uses
30.7
99.3
77.6
37.9
2010
Power23%
Automotive14%
Industrial60%
Residential3%
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 9
Regional Balanced Gas Reserves
• The region has enough reserves to allow Brazil to improve gas participation in its energy matrix.
REGIONAL RESERVES (TCF)
11.1 18.5 27.6
0% 20% 40% 60% 80% 100%
Brazil Argentina Bolivia
• The Southern Cone is regionally balanced between supply and demand, but cross-border agreements are required.
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 10
Required Infrastructure
• However, natural gas reserves still need to be connected to demand centres, and some significant challenges remain open
US$ 4.5 billion investment in gas pipelines in the 2006 – 2010 period
Planned Pipelines
US$ 4.5 billion investment in gas pipelines in the 2006 – 2010 period
Planned Pipelines
Existing Pipelines
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 11
Competitive Prices: the Gas Advantage
• Gas for power generation has a clear advantage among some fuels,but it will depend on the price of coal or hydro electricity.
• Current prices for different fuels and segments by countries ….
3.5 4.0
9.0
16.0
8.0
• Gas advantage for industrial consumption depends on the type of fuel to be replaced.
COAL
HYDRO
5 / 6
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 12
Sustainable Prices: an Exercise …
A net back exercise for the region assuming Bolivia´s reserves (and pricing …)
BahíaBlanca
2.14
Neuquen
2.44Santiag
o
SanJerónim
o
Methanex - TDF3.42
Uruguayana
Mejillones
0.80
1.164.86
3.850.75
0.64
0.10
0.10
0.36 0.230.23
Montevideo
0.55
2.48
3.150.80
0.54
3.15
1.70
Porto Alegre
San Pablo
5.20
0.33
4.13
3.3.52
BasinGas Priceu$s / MMBtu
NodeGas Price
U$s / MMBtu
0.34
0.79
0.21
4.84
0.15
5.35
BahíaBlanca4.21
GBA
4.444.68
Noroeste3.70
4.60Concepción
Santiago
4.93
SanJerónimo
4.34
Bolivia Export
3.50
LNG
8 to10 ?
OFFSHOREBRAZIL ?
OFFSHOREARGENTINA
NEUQUEN
INTEGRATION INTEGRATION INTEGRATION INTEGRATION AT RISK ?AT RISK ?AT RISK ?AT RISK ?
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 13
Outlook and Conclusions
• Brazil stands as the major emerging gas market in the region;
• The Southern Cone has gas reserves and gas demand within the same region;
• However, deepening differences among countries defer integration and complete successful development of natural gas supply;
RESERVES DEMANDRULES
• INFRASTRUCTURE• PRICES
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 14
Outlook and Conclusions
• A Regional Policy for Sustainable Energy SupplyRegional Policy for Sustainable Energy Supply is required at the Southern Cone to improve reliability of supply and guarantee long term economic development;
• Significant capital expenditures are still required to:– develop and produce stranded gas reserves;– place infrastructure to link reserves to markets;
• A compatible and comprehensive set of gas prices for different categories of consumers is needed;
• Current end-user price competitiveness of natural gas at Brazil and Argentina should be acknowledged by Bolivian Government;
IGU – 23rd World Gas Conference – PGC “C” - Brazil Case Study 5 – 9 June 2006, Amsterdam NL - 15
Thank you !!
All Industry Players in this regionshould keep on working together,
finding creative solutions to tap existing needs,and continue natural gas development.
