Brazilian Natural Gas Demand to Exceed Sulgas’ Supply in 2008

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Researched by Industrial Info Resources (Sugar Land, Texas). According to supply and demand projections made by Sulgas, a Brazilian natural gas distribution company, the demand for natural gas in 2008 will exceed the reserve supply especially in the southern Brazilian state of Rio Grande do Sul. This year Suglas will invest $9.3 million in expanding existing networks, while in 2005 it already invested $6.5 million to expand its existing natural gas transmission system to supply new regions and towns throughout Brazil with its products.

Rio Grande do Sul´s state government owns 51% of Suglas, while the federal state-owned energy company known as Petrobras (NYSE:PBR) has the remaining 49%. In 2005 demand in the state driven by industrial consumption and expansion of the vehicular natural gas industry (VNG) reached 2.3 cubic meters and is estimated to rise to 2.5 million cubic meters of gas in 2006, 2.6 million for 2007, 2.8 million cubic feet in 2008, and finally 2.9 million by 2010.

In 2001, the startup of B2B, a 3,000 km pipeline linking natural gas-producing regions in Bolivia to southern Brazil and crossing right through Brazil's industrial hub state of Sao Paulo, led to a rapid growth of gas sales in local markets mainly led by the VNG and residential consumption industries. This pipeline is operated by TBG, but it is the result of a joint venture led by Petrobras with a 51 % controlling stake. The supply to the state through this pipeline which had limits of 2.2 cubic meters in 2005, is expected to reach 2.7 cubic meters in 2007 due to an extra compression station that will be installed by TBG.

Until the conclusion of the B2B pipeline in 2008, Sulgas will need to plan its expansion carefully and leave the introduction of natural gas in other areas for post B2B completion.

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