Petroleo Brasiliero Expands its Natural Gas Operations in Sao Paolo

Online, June 1, 2010 (Newswire.com) - Petroleo Brasiliero (Press Release -June, 1 , 2010)the Brazilian state company, yesterday expanded its distribution of natural gas taking up Gas Brasiliano Distribuidora SA in a $250 million deal. The state run company, the world's second largest oil company also known as Petrobas, bought the Sao Paolo state natural gas supplier from Eni Spa, an Italian Oil and Gas company.

Gas Brasiliano supplies the country's crucial industrial hub, Sao Palo state, whose market Petrobas plans to tap in a bid to increase natural gas consumption particularly in the industrial sector. The company is a supplier of gas to industrial, commercial, transportation and residential companies located in the 375 cities and towns that comprise the Sao Paolo state. Last year, Gas Brasiliano sold about 529,000 cubic meters per day with its distribution network of 734 kilometers.

In recent months, Petrobas has gradually increased its gas distribution assets in its attempts to expand the use of natural gas in the country. With the recently discovered offshore oil reserves, the company expects that natural gas production will go up. It recently finished several sections of its nationwide natural gas pipeline to improve distribution and started auctions of natural gas in order to increase gas supplies and its presence in the region as well. In the beginning of 2010, the state company estimated average daily gas consumption in the country would top 50 million cubic meters, up from 46 million cubic meters last year.

Even though it's the largest supplier of natural gas in Brazil, this new investment deal will most likely not face any antitrust issue. It has shares in all of the state owned natural gas companies with an100% stake in the Sao Paolo state company. Natural Gas companies in Brazil operate under the specific-regions-30-year concession contracts with the state that can be extended.

This investment acquisition positions Petrobas as a major distributor in the largest Brazilian market for natural gas. The company however noted the fact that imports of natural gas from Bolivia, a neighboring country, are as well crucial in the Sao Paolo market. The gas is transported via the Gasbol pipeline and on the average, Brazil imports over 30 million cubic meters of natural gas a day from Bolivia.

With this announcement, Petrobas shares traded 2.9% higher at 27.84 reals on the Sao Paolo Stock Exchange. Gas distribution in Sao Paolo and Rio de Janeiro, Brazil's two most populous states are served by multiple, publicly held distributors.
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