Bolognesi to build two LNG terminals in Brazil

Market: Electricity, Natural gas
28/11/14

Brazil´s Bolognesi Group will install two LNG receiving terminals and two associated power plants with more than 2,400MW of total generating capacity, following its successful participation in a government electricity procurement auction today.

Bolognesi Group founder Ronaldo Bolognesi told Argus the company already has a long-term LNG contract with a "large international supplier."

This contract was signed last year, but the company opted not to participate in the previous auction because of the low ceiling price offered by the government in previous auctions, he said.

Bolognesi said US LNG firm Excelerate Energy will provide floating storage and regasification units (FSRUs) which will deliver LNG to the Rio Grande and Suape ports. Each FSRU will have regasification capacity of 14mn m3/d, of which 6mn m3/d will be used to fuel the plants. The remainder of the LNG will be sold to local industries.

The two new regasification terminals will be the first in Brazil that will not be owned by Brazilian state-controlled oil company Petrobras, which currently has three terminals with a total capacity of 49mn m3/d.

Excelerate Energy could not be reached for comment because of the extended US Thanksgiving holiday.

Rio Grande do Sul-based Bolognesi plans to install the 1,238MW Novo Tempo plant in the northeastern state of Pernambuco and the 1,238MW UTERG plant in Rio Grande do Sul state in the south.

Each power plant will cost roughly R3bn, according to Bolognesi.

In today´s auction, Bolognesi sold the supply from the power projects for R206.50/MWh ($80.44/MWh), a modest discount off the government-set ceiling price of R209/MWh.

In the December 2013 auction, the ceiling price for thermoelectric projects was R144/MWh.

"Finally the government set the ceiling price at a reasonable rate. It's a step forward," Bolognesi said.

An ongoing severe drought in Brazil has forced the government to push up prices offered for thermoelectric power in an effort to increase its base power load.

Bolognesi said the gas in Rio Grande do Sul will be distributed by a gas pipeline to several cities in the region via a future pipeline that is scheduled to be offered through a government build-and-operate auction in 2015.

To participate in today´s auction, companies needed to provide the government with preliminary LNG supply contracts. Participants also needed to secure permission from the oil regulator (ANP) and the mines and energy ministry to import gas.

Bolognesi said there is "significant" repressed demand for LNG in Rio Grande do Sul state.

Evidence of the state´s pent-up demand is a record of importing LNG through the Argentinian terminal of Bahia Blanca to supply the 630MW AES Uruguaiana plant. Operation of the plant was suspended in mid-May after Petrobras apparently failed to reach an adequate supply agreement with Argentina.

Based on the terms of the auction, Bolognesi should complete construction of the power plants by 2019.

Both plants have 25-year supply contracts with local power distributors that begin in 2019.

Brazil has become increasingly dependent on LNG-based thermoelectric generation because of the drought that has sapped its hydroelectric reservoirs.

In the first nine months of 2014, Brazil imported an average of 19.69mn m3/d of LNG, compared to 15.13mn m3/d in the same period of 2013, according to the most recent monthly report issued by the mines and energy ministry.

Petrobras´ three regasification terminals are 28mn m3/d Guanabara in Rio de Janeiro state, 7mn m3/d Pecem in Ceara state and 14mn m3/d Bahia in Bahia state.

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