Skip to content

Can Brazil balance gas demand and output?

August 19, 2007

In the face of robust economic growth in South American countries like Brazil, it’s a valid question to ask if there’s enough energy to plug rocketing gas and energy demand. One of the biggest challenges of Latin American countries during this decade and the next will be to fuel economic growth at competitive energy prices.

Argentina is an example Brazil shouldn’t emulate because subsidizing energy without any long-term energy plan (see Energy subsidies – burning money the Argentinean way) is a recipe for failure.

Of all the countries in the region, possibly Brazil’s energy policy is the most sensible and focused. But it faces big challenges if it’s going to keep up with ever-rising demand.

Forecasts in state-owned energy company Petrobras’ 2008-12 business plan shows that the company sees gas consumption raising to 19.4% annually to the year 2012 compared with a 17% annual forecast in 2006. For the sake of comparison, Rio de Janeiro-based consultancy Centro Brasileiro de Infra-Estrutura (CBIE) saw in 2004 annual gas consumption rates at 5-9%.

The investment needs in Brazil are enormous. Some analysts believe that satisfying 4-5% growth rates per year will require 15-20 billion reais ($7.17-$9.5 billion) annually to satisfy burgeoning power demand. About 70% of such investments will be earmarked for gas-fired generating capacity.

Attracting such investments won’t be an easy task. Apart from environmental and regulatory issues that will slow such energy projects, one of the biggest issues is Petrobras’ dominant role in Brazil’s gas markets. The slowness at which the present government has moved on passing a new gas bill highlights the issue.

Brazil’s gas markets are regulated by a 1997 hydrocarbons law that came into force when the country was seen as a net importer of gas.Petrobas is speeding up upstream projects in the Santos Basins through schemes like Plangás and building liquefied natural gas import terminals to bolster supply reliability.

Will Brazil be able to keep up with ever-growing gas and energy demand? At the present pace it’ll be an uphill challenge made more difficult by Petrobras’ role in the country’s energy markets.

Greater deregulation and competition could work in Brazil’s favor.

Advertisements
No comments yet

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: