Gas Brasiliano tapping demand from industrial users in São Paulo

Monday, April 10, 2017

The CEO of Gas Brasiliano, Petrobras' subsidiary in the natural gas distribution business, spoke to BNamericas about the company's pipeline expansion work in its concession area, which is the northwest region of São Paulo state. His forecast for 2017 is optimistic.

"We estimate that more than 4,300 new clients will be connected to our gas distribution network by the end of the year," says Piazza Júnior.

BNamericas: The Brazilian natural gas market has an urgent agenda ahead. From Gas Brasiliano's point of view, what should be the government's priority in the short and medium terms?

Piazza Júnior: As a distribution company, we believe that only the feasibility of natural gas swaps will help Brazil bring new players into this market. The main obstacle, in terms of feasibility, is still the country's tax issue, given the fundamental need to dissociate the physical flow of natural gas from the contractual flow. That is the main agenda, since the ripening of the Brazilian gas market will be directly affected by the increase in the number of suppliers, carriers and traders.

BNamericas: Where in São Paulo state is the company looking to expand this year?

Piazza Júnior: Gas Brasiliano will expand its natural gas distribution services to the city of Catanduva in the first half of 2017. Catanduva stands out for its consumption potential, the high local human development index and increasing income per capita. Catanduva has four industrial areas where there are plants from different areas, such as metallurgy, construction, printing, footwear, furniture, and machining. Two industrial consumers in the area of food and beverages have already closed a supply deal with Gas Brasiliano. That is the beginning, but there are several potential clients in the region. The entire gas pipeline network will extend more than 10km.

In the second half of 2017, our focus will be the connection of the local Catanduva system to Gas Brasiliano's main distribution network. Scheduled for completion in 2018, the 54km pipeline will run from Itápolis to Catanduva. In the future, we will continue the expansion of this network within the municipality. The goal is to offer gas distribution services to all of the industrial districts. The project as a whole involves the laying of 82km of gas pipelines, with investment of about 58mn reais [US$18.6mn].

BNamericas: What other expansion projects of Gas Brasiliano's natural gas distribution network will be in the spotlight this year?

Piazza Júnior: Also at the beginning of the year, the company will complete expansion work on the network from Ribeirão Preto to Cravinhos, which is emerging as an industrial hub for several segments. This project will also serve a new area of ​​Ribeirão Preto. Work started at the end of October 2016 and includes the construction of approximately 14km of gas pipelines, costing about 6mn reais.

Piazza Júnior: There is also the conclusion of the network in Igaraçu do Tietê, whose strength is ceramic production. The pipeline begins in Lençóis Paulista, going through Macatuba, and it will reach Igaraçu do Tietê, which can be expanded to Barra Bonita. Work, which started in September 2015, will add 34km of gas pipelines to São Paulo state, with an investment of more than 25mn reais. There are also projects to expand the network to urban markets of municipalities that are already connected to the main network, such as Araraquara, Bauru, Marília, Ribeirão Preto and São Carlos. In these municipalities, 11.6km of gas pipelines will be built at a cost of 3mn reais.

BNamericas: What is the forecast for growth in the client portfolio?

Piazza Júnior: Today, Gas Brasiliano has almost 20,000 consumers of piped natural gas in its portfolio. By 2017, the expectation is that this figure will continue to grow. We estimate that more than 4,300 new clients will be connected to our distribution network by the end of the year. About the development of new markets, Gas Brasiliano has intensified its technical studies to introduce natural gas into the sugarcane sector, partnering with sugarcane producers. One of our goals is to increase gas consumption in truck fleets, with a partial substitution of diesel oil using a dual-fuel technology, which provides significant cost reduction. The first test of this project will likely happen in 2017 with an important industry group of the sugarcane industry. We also intend to strengthen gas consumption in power cogeneration. In this case, the idea is to use a hybrid steam cycle fueled by both sugarcane bagasse and natural gas. This technology increases the overall efficiency of the plant by reducing its consumption of sugarcane bagasse when generating electricity.