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Spain's Endesa looking at Brazil LNG import role

31 Oct 2013 13:09:18 | glm


Spanish electricity generator Endesa is in talks with Brazil’s state-owned gas company Petrobras over the use of South American country’s three LNG import terminals in an effort to secure supplies for future gas-fired generation projects.

Conversations have focused on Endesa securing the right to import cargoes into the floating storage and regasification units (FSRUs), rather than taking formal capacity at any of the facilities, ICIS understands.

“The idea would be that [Endesa] could organise cargoes to be delivered to one or all of the Brazilian terminals,” a source close to the discussions told ICIS. “It’s something [Endesa is] analysing, though conversations at are an early stage and there has been nothing decided yet.”

Access to Brazilian terminals would allow Endesa to arrange deliveries through an existing supply arrangement with British portfolio supplier BG Group.

A recently re-negotiated supply contract between the parties for the Quintero terminal in central Chile gives the Spanish generator increased flexibility for future cargoes and an ability to nominate new delivery points.

Endesa targets Pecem supply

Discussions between Endesa and Petrobras have focused in particular on the potential future use of the existing Pecem FSRU import terminal in northeast Brazil and the Bahia LNG terminal which is due to come on line in November.

Endesa Fortaleza, the Spanish generator’s subsidiary in the north of Brazil, currently operates a 345MW power plant in the state of Ceara, which is connected by a pipeline to Pecem. The generator proposed a second 369MW combined-cycle power plant at the same location as part of a recently closed tender for new power projects organised by Brazil’s federal energy planning agency EPE.

Endesa’s Fortaleza II project was one of 16 gas-fired projects proposed in the round, through which contracts will be awarded later this year for new generation projects to come on line by late 2018.

Total capacity for the 16 gas-fired projects proposed in the round sits at 7.5GW, compared with the 13.6GW of gas-fired capacity currently installed on the grid.

While Brazilian law enables private companies to own and operate natural gas import infrastructure in practice, Petrobras holds a monopoly in the market.

Earlier this year, Brazilian shipping company LLX was awarded an environmental license for the construction of an LNG regasification terminal at its Acu port complex planned for Rio de Janeiro. However, plans for the project remain on hold, while sister company MPX awaits authorisation to develop its own gas-fired projects proposed in the recently closed tender.

Petrobras third-quarter results

Higher-than-average natural gas consumption due to an ongoing drought in Brazil has kept Petrobras in the LNG spot market for over much of 2013, it said in its third-quarter results release on 28 October.

The state-owned company imported an average of 12.8 million cubic metres (mcm) per day of LNG through its two import terminals at Guanabara Bay and Pecem over the July-September period, up by 75% year on year.

However, Petrobras said an improvement in reservoir water levels has enabled it to scale back the pace of its LNG buying compared with the earlier part of the year. LNG imports were 43% lower than the 18.3mcm/day imported over the previous quarter, according to the company’s financials.

A total of 17 LNG cargoes were imported across the third quarter of this year, ICIS data showed, compared with just 14 through the same quarter in 2012.

A record 24 cargoes were imported over April-June 2013. However, the expected continuation of the drought into 2014 and addition of fresh import capacity through the start-up of Brazil’s third FSRU terminal off the coast of Bahia state in November could lead to a new peak.

The extra capacity at Bahia and the installation of a newbuild FSRU vessel at Guanabara Bay will take Brazil’s import capacity to 41mcm/day from 27mcm/day by mid-2014.

Lower-than-average rainfall across much of Brazil over the second half of 2012 and first half of this year reduced output from the country’s hydroelectric power generation facilities. Natural gas demand subsequently surged, as thermoelectric generation plants were switched on to cope with power demand.

Demand from the thermoelectric generation sector jumped by 73% over a 12-month period, according to Petrobras, with generation levels from its own assets more than doubled between the third quarter of 2012 and the third quarter of 2013.

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