Big gas projects abound in Venezuela, Brazil.

Since 1999, the state oil and gas company, Petroleos de Venezuela, S.A. (PDVSA), has been advancing work on the Deltana Platform, an offshore continental shelf gas find close to the border with Trinidad & Tobago believed to hold some 38 Tcf of gas and some 3.6 billion barrels of oil.

Lack of experience operating at considerable water depths and financial constraints have encouraged Venezuelan authorities to grant the Deltana Platform licenses to a private international consortia. ChevronTexaco is partnering with ConocoPhillips in Block 2 while Statoil has been granted the license corresponding to Block 4.

Deltana Platform together with the Mariscal Sucre Liquefied Natural Gas (MSLNG) might hold enough gas reserves to supply the entire East Coast of the United States. These projects will attract billions of dollars in investment over the next 20 years and will result in the expansion of the nation's already considerable natural gas reserves, and the positioning of Venezuelan LNG in the United States, Mexico and perhaps even the north of Brazil.

The MSLNG and Plataforma Deltana are Venezuela's first venture into the development of non-associated natural gas reserves, and it is aimed at positioning Venezuela as a key supplier in the Atlantic Basin LNG market.

The Rio Caribe, Mejillones, Patao and Drag6n offshore fields, which comprise MSLNG's drilling area, are located in the north of Paria in eastern Venezuela, and could yield, at least 1,050 million cubic feet of gas a day. The companies partnering in the MSLNG consortium are: Shell (30%), Mitsubishi (8%), PDVSA Gas (60%) and small Venezuelan private consortia (2%). Qatar Oil has expressed interest in absorbing up to 9% of PDVSA's share though its participation has yet to be determined.

The development of these fields and the construction of the LNG train on Paria peninsula with capacity of 4.7 million tons could yield significant opportunities to suppliers of oil and gas field machinery in the United States. The development of the fields may require new 3-D seismic coverage and the drilling of more than 35 development wells.

The development stage (incorporates) contemplates the construction of production platforms for handling natural gas and hydrocarbon fluids, and the construction of the LNG train, whose characteristics have yet to be determined. The MSLNG partners expect to invest USD $1.5 billion in the completion of the upstream issues contemplated under the

Preliminary Development Agreement (PDA), and US$1.2 billion would be spent in the development of the LNG train.

The Interconnection of Venezuela's EastCentral and West Natural Gas Transmission Systems (ICO) could represent procurement opportunities on the order of $192.75 million to foreign suppliers. The interconnection plan, known as 1CO by its Spanish acronym, was launched in early 2003, and its construction will be completed in mid 2006.

Venezuela's largest onshore natural gas production fields are located in Anaco in the southeast of the nation. As the commercialization of gas began to gain importance, more pipelines were laid out between this region and cities in the central portion of the nation, forming an east-central natural gas distribution corridor also known as the Puerto Ordaz--Barquisimeto pipeline system.

Almost simultaneously, a somewhat smaller transmission system developed between the cities of UIe in the State of Zulia and the Refinery Complex of Paraguana (CRP) in western Venezuela. Venezuelan authorities have expedited plans to interconnect both systems since early 2003.

The state oil and gas company, Petroleos de Venezuela, S.A. (PDVSA) oversees the project through its fully owned subsidiary in the gas sector, PDVSA-GAS. The planning division of PDVSA-Gas has disclosed information indicating that the contracts for the engineering and construction of the ICO project will be granted to Venezuelan engineering firms, but US$192.75 million of the procurement will be from foreign sources.

Brazilian Activities Mounting

In Brazil, meanwhile, Minas Gerais state natural gas distributor Gasmig and its minority shareholder, federal energy company Petrobras, plan to invest some US$190 million through 2008 to expand the state's natural gas network by 500 kin, Gasmig's new business manager D6cio de Abreu said.

The expansion was made possible after Minas Gerais state power company Cemig, Gasmig's controlling shareholder, sold a 40% stake in the distributor to Petrobras last December, giving Gasmig the cash to carry out investments. Under the agreement, Petrobras is responsible for building the new gas supply system by investing in the transport network and Gasmig is responsible for increasing distribution.

Gasmig and Petrobras plan to invest more than US$460 million to expand the local gas network through 2010. "The master plan that anchors the agreement determines that by 2010 we will triple the gas market in the state," Abreu said. Gasmig currently sells 3 million cubic meters of gas a day in the state, half of which is used by two power plants. The company plans to distribute 4.5 million cubic meters of gas to its clients by 2010, excluding power plants.

Gasmig is currently supplied with gas from the offshore Campos basin through a 357-km pipeline linking Petrobras' Reduc refinery in neighboring Rio de Janeiro state to the Minas Gerais capital Belo Horizonte. The Gasbel pipeline, as the connection from Rio de Janeiro is known, has 3.5 million cubic meters/day capacity and Gasmig is operating very close to its limit.

"We need to increase the gas supply to the state in 2007 because by the end of 2006 we expect to be using up the whole of the [Gasbel] pipeline's capacity," Abreu said. To increase supply to the state, Petrobras plans to double the Gasbel pipeline's capacity and build a connection linking Gasmig's network to the Brazil-Bolivia gas pipeline that cuts across neighboring Sao Paulo state.

Gasbel's expansion is awaiting an environmental license from the federal environmental protection agency Ibama. The expansion would cut across Minas Gerais state to the nation's capital city Brasilia in the center/west region. Around this pipeline, Gasmig would build a network to supply the industrial and agricultural region of Minas Gerais known as the Triangulo Mineiro. There is no date set for the start of this project since it depends on Petrobras and Ibama.

Meanwhile, Gasmig is moving ahead with two expansion projects that will meet demand and increase gas supply into the state.

Gasmig will invest another US$60 million to build a 200-km distribution network in the southern region of Minas Gerais state around Petrobras' pipeline. This will increase the company's current 300-km gas pipeline distribution network and meet pent-up demand for the fuel.

Finally, Gasmig has already started the US$70 million Vale-to-Aco project to build an 18-inch diameter, 300-kin pipeline network to take natural gas to the metallurgy and mining companies in an industrial region of southern Minas Gerais state, he said. Investment in the first phase of Vale do Aco began in January with the construction of a US$14.4 million, 52-km link that will start supplying natural gas to iron ore and mining conglomerate CVRD by this summer.