Bahiagas to expand network in north-eastern Bahia state

Brazilian natural gas distribution company Bahiagas plans to invest 65 mm reais ($ 27 mm) this year to expand its network in north-eastern Bahia state ahead of the start-up of the offshore Manati gas field in late 2006, Bahiagas CEO Petronio Vieira told.
Brazil's federal energy company Petrobras and Brazilian engineering group Queiroz Galvao are investing 1 bn reais in the development of the field that will start delivering up to 6 mm cm of gas by end-2006. The field is expected to remain productive for 17 years.

Bahiagas plans to invest 35 mm reais this year in revamping its distribution network to receive gas from the Manati field and another 30 mm reais in other related projects. The extra supply from Manati will allow Bahiagas to increase its gas distribution volume to 4.5 mm cmpd by end-2006 from the current level of 3.5 mm cmpd, Vieira said. Bahiagas expects the market to grow to 5.1 mm cmpd in 2007 and 6.4 mm cmpd in 2008, according to Vieira.
"This growth reflects the market's potential in Bahia state. The gas from Manati field will be a solution for our problems in the next three to four years," he said.

The company is currently facing gas supply problems and is holding off expansion plans since Petrobras, which delivers the gas, is currently unable to increase supplies. In fact Petrobras has cut gas supplies to Bahiagas by 300,000 mm cmpd since the end of 2004.
"Petrobras is controlling [gas] supplies from the oil and gas fields in the [onshore] Reconcavo basin," Vieira said.

The decision to cut supplies in order to relieve pressure on Bahia's mature onshore gas fields has forced Bahiagas to refuse expansion projects solicited by its industrial clients that consume 90 % of the gas distributed in the state. It also led to a reduction in supplies to Brazilian petrochemicals company Braskem to 600,000 mm cmpd from 1.2 mm cmpd. As a result Braskem took Bahiagas to court, Vieira said.
The lack of gas supplies also forced the three gas-fired power plants in the state almost to shut down altogether, he said. Only the Petrobras-controlled 151 MW Fafen power plant is producing any power, at a third of its capacity. The 350 MW Chesf Camacari plant and Petrobras' 186 MW Termobahia plant are both at a standstill.

Manati will solve most of these problems by bringing total gas supplies in the state to 12 mm cmpd. Petrobras will take some 4 mm cmpd for its own use, including supplying Fafen and Termobahia, leaving up to 8 mm cmpd for Bahiagas.
Manati could also signal the start of a renewed expansion of the gas industry in Bahia as other projects are expected to start up in coming years. In 2008, Petrobras expects to complete the construction of the 1,200 km Gasene gas pipeline link between Bahia and the south-eastern Rio de Janeiro state.

Initially Gasene will bring 8 mm cmpd from the southern Campos and Espirito Santo basins to the northeast, but the pipeline's full capacity is 20 mm cmpd, which would allow gas to be piped further north as part of the Malhas pipeline expansion program. Also oil companies expect to find more gas close to the Manati field in the Camamu basin.
"There are plans for drilling wells in Camamu and I know the companies are optimistic," Vieira said.

Bahiagas is Brazil's third largest gas distribution company.
The Bahia state government has a controlling 51 % stake, while Petrobras and former Enron controlled company Gaspart each have 24.5 %.