Brasília, 4/26/2006 (Agência Brasil - ABr) - Petrobras has been unable to reach agreements with contractors for the construction of two Amazon region gas pipelines, the Urucu-Porto Velho and Coari-Manaus. According to the executive manager for Gas and Energy at the company, Rafael Schettini Frazão, Petrobras estimates the cost at R$1 billion, but contractors are asking R$2.4 billion. Petrobras has already invested some R$500 million in the project.

Frazão says it may be necessary to get assistance from Army engineers to bring the price in line.

The Coari-Manaus pipeline, which is already under construction, runs for 380 kilometers. The Urucu-Porto Velho pipeline will be 520 kilometers long. Environment licenses for both pipelines were granted at the beginning of the year. If construction begins now, they could be operational by 2008.

According to electricity sector regulatory agency (Aneel) spokespersons, at the moment the Amazon region gets much of its electricity from diesel generators and thermoelectric power plants which is expensive. With natural gas brought in by the pipelines, the situation will be reversed. The region could become a net exporter of electricity and generation costs will be reduced by more than 50% (Manaus spends R$1.9 billion annually on the generation of electricity; a cost that could drop to R$800 million if natural gas is available, says Aneel).

Translation: Allen Bennett