Brazil cashing in on natural gas resources

Nov. 11, 2011 at 4:33 PM
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RIO DE JANEIRO, Nov. 11 (UPI) -- Brazil is cashing in on its natural gas resources with new international deals that secure both early development of existing finds and new investors for the industry.

Swedish group Skanska this week announced a $490 million engineering, procurement and construction contract to build a new 550 megawatt natural gas thermal power plant in Rio de Janeiro. It is Skanska's biggest contract in Latin America.

A larger deal finalized Friday will see Chinese energy giant Sinopec paying $3.54 billion for Portuguese company Galp's 30 percent stake in a deep-sea asset in Brazil's Santos Basin in the South Atlantic, about 190 miles southeast of Sao Paulo.

The Skanska contract with Brazilian energy group Petrobras aims to push forward a gas-powered thermal power generation project in Seropedica at Baixada Fluminense, about 45 miles north of Rio de Janeiro.

Skanska, the single contractor of the project, will do the basic design, detailed engineering and construction of the facilities.

The contract includes the procurement of equipment and material and Skanska will assist with the start-up and operation of the plant by the end of 2014. At its peak the plant will have about 1,500 people on the job.

Skanska has been building its business on the continent, focusing on construction, operations and services for the international oil and gas and energy industry. Last year it had about 10,000 employees in the region, one-fifth of an estimated 52,000 Skanska workers worldwide. The company has headquarters in Stockholm, Sweden.

The other energy deal announced Friday gives Galp cash needed to continue expanding operations in Brazil's energy sector, where the sheer size of the required investment and project scale has kept many players out of the picture. Brazil's deep-water reserves require special skills and equipment not used elsewhere and drilling to great depths under the sea bed.

Sinopec's wholly owned unit, Sinopec International Exploration and Production Corp., will take new shares to be issued by Galp and assume shareholder loans, Sinopec said in a statement.

The immediate investment and future capital expenditure could exceed $5 billion, it said.

Sinopec expect to receive 21,300 barrels of oil equivalent per day by 2015, the production set to reach 112,500 boe per day by 2024.

The Sinopec deal means a major entrance for China in Brazil. Last year Sinopec paid Spanish energy group Repsol $7 billion for a 40 percent stake in its Brazilian operations.

China this year has spent more than $37 billion on buying foreign assets, still less than $54 billion it lavished on acquisitions in 2010 but with seven weeks to go before the end of the year.

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