Gazprom to Cooperate with Brazilian Oil and Gas Giant

World’s largest gas company Gazprom solidified presence in South American market by singing a Memorandum of understanding with Brazilian company Petrobras, one of the largest gas producers in the region and the owner of the local oil and gas transportation systems. The Memorandum was signed in Rio de Janeiro on Friday. The document puts emphasis on technological cooperation as well as on collaborative efforts in offshore field development and liquefied natural gas production. The companies also aim to launch mutually beneficial projects in hydrocarbon exploration, production and transmission in South America.

By Sergei Balashov: [email protected]

Right after signing the Memorandum the parties commenced negotiations discussing issues relevant to the document, such as the working schedule and responsibilities of the study group and the number of mutually beneficial projects, according to Gazprom’s official press release. Russian gas monopoly also confirmed interest in building Trans Latin American gas pipeline in collaboration with Brazil, Argentina and Venezuela to develop the regional gas transmission systems.

Gazprom representatives did not comment on the Memorandum signing.

Brazilian Government owns 32% of Petryleo Brasileiro or Petrobras which dominates the oil and gas market in the country controlling 95 percent of crude oil reserves estimated to be at the level of 1.5 bln tons and 90 percent of Brazil’s natural gas reserves of 326 bln cubic meters. Brazil produces over 90 mln tons of oil and 11.5 bln cubic meters of gas annually which is not enough to cover the domestic demand as the country consumed over 19 bln cubic meters of gas in 2006 forcing imports from Bolivia and Argentina. Petrobras also owns 11 refineries and controls domestic oil and gas transportation system which includes 6400 km of oil pipelines, 2500 km of gas pipelines along with offshore terminals and storages, reports Gazprom’s information department.

Petrobras recently reported a net profit increase of 9% from R$25.7 bln ($11.4 bln) in 2005 to record setting R$25.9 ($12.5 bln) in 2006. The company’s market value hit the R$230 bln ($110.4 bln) mark in 2006, a 33% increase from the previous year’s numbers.

Brazil possesses over 100 oil and gas fields concentrated in 8 basins with the major part of its reserves located in deep water fields.

Gazprom’s recent activities marked the expansion of its interests in the region. Prior to the official visit to Brazil, the director of Gazprom’s foreign economic relations department Stanislav Tsygankov signed a memorandum of understanding with Bolivian state-controlled gas company Yacimientos Petrolíferos Fiscales de Bolivia (YPFB) to "consider cooperation in the exploration and development of hydrocarbons in Bolivia, as well as in infrastructure and LNG projects."

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