Brazil Postures to Bolivia - Keep Your Natural Gas

By Carla Simoes and Jeb Blount

Jan. 8 (Bloomberg) -- Brazil may close 15 natural-gas-fired power plants tomorrow, reducing use of the fossil fuel in favor of cheaper hydroelectric power amid a gas dispute with Bolivia.

Brazil’s Electricity Sector Monitoring Committee will consider the plan to shut the plants at a meeting tomorrow morning in Brasilia, Edison Lobao, Brazil’s energy minister, said in an interview. If approved, this will be the second mass- plant closure in as many weeks. The country’s national grid operator earlier this month shut all gas-fired plants in Brazil’s industrialized southeast.

The proposed shutdowns prompted Brazil to cut its imports of gas from Bolivia, the provider of about half the country’s supply, by more than a third in recent weeks. Bolivia, whose largest source of government revenue comes from taxes on hydrocarbons, is sending two ministers to Brazil to discuss the cuts, Lobao said.

“Right now the gas-fired plants are being used as a strategic reserve and all of the thermal plants will probably be turned off,” Lobao said in an interview from his office in Brasilia. “This will be decided tomorrow and we will probably turn off 15 plants. This will reduce costs.”

Bolivian President Evo Morales will send Hydrocarbons and Defense of State Interests Minister Hector Arce and Planning and Development Minister Carlos Villegas to the meeting in Brasilia, according to La Razon, a La Paz newspaper.

On Jan. 1, Petroleo Brasileiro SA, or Petrobras, Brazil’s state-controlled oil company, cut its imports of natural gas by more than a third to about 19 million cubic meters a day from 31 million, the Rio de Janeiro based company said yesterday.

Argentine Alternative

The Bolivian government said yesterday that it may seek new markets for the country’s gas in Argentina, La Razon reported.

A lack of production and pipeline capacity has limited sales to Argentina to about 2.2 million cubic meters a day, even though Bolivia has a contract to supply as much as 7.7 million cubic meters a day to its only other gas export market.

Normal purchase amounts in Brazil will likely be restored in three months, Lobao said.

Brazilian electricity grid manager Operador Nacional do Sistema Eletrica shut thermal-power plants after rains filled reservoirs, making cheaper hydroelectric resources available, Petrobras has said. Petrobras runs many of the plants.

Gas-fired generators are used during drought periods and to reduce demand for hydropower, allowing dams to refill. Brazil gets more than 80 percent of its electricity from the dams.

Filling Reservoirs

In Brazil’s southeast and central west, which includes Rio de Janeiro and Sao Paulo states, reservoirs were 56 percent full in December, compared with 46 percent a year earlier, according to the operator’s Web site.

Under its contract with neighboring Bolivia, Brazil must buy an average of 24.8 million cubic meters (876 million cubic feet) of gas a day each year and a monthly average of no less than 19 million cubic meters a day, Petrobras said.

If imports fall below the minimums, Petrobras still has to pay for the gas it doesn’t use. Petrobras has the right to buy as much as 31 million cubic meters a day, the maximum that can be shipped through the pipeline that links the two countries.

To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net