Brazil, Chile, Argentina face gas shortage on Bolivia supply snag

Brazil, Chile, Argentina face gas shortage on Bolivia supply snag

Rio de Janeiro (Platts)--10Apr2006

Brazil Friday began to sharply reduce gas consumption, in a
government-ordered rationing expected to last several weeks, after Bolivian
pipeline ruptures slashed gas shipments to Brazil from its top supplier.

Brazil, Argentina and Chile all face cuts in natural gas supply as
Bolivia's output is seen falling, as of Monday, to as little as 25 million
cubic meters/day (882,000 Mcf/day), from a normal 40 million cu m/day, two
well-placed Bolivian gas industry sources, who asked not to be named, told
Platts over the weekend.

The sources said repairs to Bolivian pipelines damaged by heavy rains
April 2 could begin slowly boosting exports from Bolivia within a week. A
resumption of Bolivia's normal 32 million cu m/day gas exports may take as
long as 30 days, or until production at the Petrobras-operated 10 million cu
m/day San Antonio field and Repsol-operated 5 million cu m/day Margarita field
is fully restored.

Petrobras, which plans to cut natural gas consumption by 51% at its 1.9
million b/d Brazilian refinery network, will reduce export of products such as
fuel oil as its refineries use more of it to substitute for gas, a Brazilian
source told Platts. Petrobras exported an average 250,000 b/d of refined
products in the fourth quarter of 2005, according to company data.

Rising diesel, coal and hydro use in the Southern Cone countries will
help make up for gas shortages from Bolivia in coming weeks, analysts said.

In addition to natural gas cuts at refineries, Brazil's Energy Ministry
ordered late Friday a 72% cut in supply to Brazilian thermal power plants fed
by Bolivian gas. The government ruled out power shortages, and said Brazil's
gas-generated electricity can be easily substituted by hydro-power, since the
country's water reservoirs are currently at high levels.

Companies that distribute natural gas to industries and residential
consumers will receive up to 12% less natural gas from Petrobras, the
state-led oil firm which sells Bolivian gas in Brazil, the government said
Friday in a statement. The measure could affect such companies as Comgas, the
BG/Shell-controlled distributor which supplies gas to Sao Paulo.

PROTESTERS BLOCK REPAIR CREWS

Three Bolivian pipelines burst on April 2 after landslides caused by
heavy rains in the gas-rich Department of Tarija, southern Bolivia. Throughout
last week, repair crews seeking access to the damaged stretches of pipeline
were blocked by protesters in the region, who were demanding more royalties.

Bolivia's government said it reached a temporary settlement with
protesters Saturday, allowing repairs to proceed. A broken pipeline supplying
gas to the Tarija region will be operating Monday, the Bolivian government
said, ending a week of heavy electricity and water rationing in the region.

The key to Bolivia's natural gas exports, however, are repairs to the
Petrobras Oleoducto pipeline which normally carries 20,000 b/d condensate
away from the San Antonio and Margarita fields, where the liquids are produced
along with gas. The broken pipeline, which Petrobras said is damaged along an
800 meter stretch, has led to a shut-in of gas production as liquid storage
has been nearly filled at the fields, sources said.

Industry sources said a temporary line could help bring San Antonio and
Margarita's production back up to 5 million cu m/d, from 15 million cu m/d
normally, within a week.

Other options to keep natural gas flowing from the two fields include
pumping liquids from the fields into provisional tanks or reservoirs, or
burning them off, which would require the approval of the Bolivian government,
sources said.

PETROBRAS IMPORTS DOWN AT 19 MILLION CU M/DAY

Petrobras regularly imports 26 million cu m/day of Bolivian natural gas,
or half of Brazil's normal gas consumption, but its imports had fallen to 19
million cu m/d by Friday, said Marco Aurelio Tavares, a consultant for Porto
Alegre, Brazil-based Gas Energy.

Brazil will likely have to accept further cuts in the coming days because
of a full shut-in at San Antonio and Margarita, which were still producing
5 million cu m/d Friday, Tavares told Platts.

Petrobras refineries, petrochemicals plants and transportation systems
normally use 10 million cu m/d of gas in Brazil, of which 6 million cu m/d go
to refineries. Refineries will probably cut consumption to 3 million cu m/d,
while petrochemicals plants and transport aren't expected to suffer cuts,
Tavares said.

The additional 42 million cu m/d of gas Brazilians consume is resold by
distributors, with about 10 million cu m/d of that going to thermoelectric
plants, Tavares said. Another 22 million cu m/d is sold by distributors to
industrial plants, while the rest goes to residences and commercial buildings,
vehicles or co-generation, he said.

ARGENTINA'S IMPORTS DOWN AT 2.5 MILLION CU M/DAY

Bolivian gas shipments to Argentina stood at 2.5 million cu m/d on
Friday, a Bolivian industry source told Platts, down from a normal 4.5-5
million cu m/d. They may have fallen further on the weekend, the source said.

The cuts to Argentina also are affecting Chile, as Argentina has in turn
cut gas supply to Chile through the Atacama and Norandino pipelines.
Electricity distributors such as Edelnor, whose biggest clients are northern
Chile's mining giants, have so far been able to use coal and diesel to
generate electricity, 60% of which is normally derived from gas, daily El
Mercurio reported Sunday. Gas shipments to the region have fallen 50%,
Mercurio reported.

After sparse investment in Bolivia's gas sector over the past year, the
country has little spare capacity to boost supply from the fields that aren't
affected by ruptures. Brazilian and Bolivian officials have been at odds over
the past month as Brazil seeks more natural gas supply from its Andean
neighbor, while Bolivia wants to raise prices for its natural gas.

--Josh Schneyer, newsdesk@platts.com

For more information, take a trial to Platts LNG Daily at
http://www.LNGdaily.platts.com.

Please visit: www.platts.com

Their coverage of energy matters is extensive!!.