According to Paragraph 6 (lines 44 - 59), it is correct to s...

Reducing the dependence on oil
Ildo Sauer, Gas and Energy Director, Petrobras.

Brazil's energy sector is following the worldwide
tendency towards greater diversification of primary energy
sources and the increased use of natural gas and
biofuels. There are several reasons for this change. The
most important are the environmental restrictions that
are gradually being adopted in the world's principal
energy-consuming markets and the need to reduce the
dependence on oil, set against a scenario of accelerated
depletion in oil reserves and escalating prices.
The share of gas in Brazilian primary energy
consumption has more than doubled in a short period,
increasing from 4.1% in 1999 to 8.9% in 2004, and this
share is forecast to rise to 12% by 2010.
Over the past two decades, the world gas industry
has experienced a structural and regulatory
transformation. These changes have altered the strategic
behaviour of gas firms, with an intensification of
competition, the search for diversification (especially in
the case of power generation) and the internationalisation
of industry activities. Together, these changes have
radically changed the economic environment and the level
of competition in the industry.
Brazil's gas industry is characterised by its late
development, although in recent years, internal supply
imports and demand have grown significantly - the
growth trajectory of recent years exceeds that of countries
with more mature markets, such as Spain, Argentina,
the UK and the US. And the outlook is positive for
continued growth over the next few years, particularly
when set against the investment plans already
announced in Brazil.
The country has a small transportation network
concentrated near the coast. The distribution network is
concentrated in the major consumption centres.
Domestic gas sources are largely offshore in the Campos
basin and Bolivia provides imports. Given the degree
of gas penetration in the country's primary energy
consumption, the industry is poorly developed when
compared with other countries. The industry requires
heavy investment in expanding the transport and
distribution (T&D) networks, as well as in diversifying and
increasing its supplies. Such investments are necessary
for realising the industry's enormous potential.
Another key industry highlight is the changing profile
of gas supply. A large part of the gas produced
domestically to date has been associated with oil
production. The latter diluting or even totally absorbing
the costs of exploiting the gas. In most cases, gas
production was feasible only in conjunction with oil
production activities. However, the country's latest gas
finds are non-associated. Thus, an exclusively dedicated
structure must be developed to produce this gas -
translating into a significant rise in production costs. This
is more significant when analysed against the high costs
associated with the market for exploration and production
(E&P) sector equipment. In recent years, the leasing costs
of drilling rigs and E&P equipment have been climbing in
parallel with escalating oil prices. This directly affects endconsumer
prices.
In a world of primary energy consumption
diversification, of greater environmental restrictions and
the reduced dependence on oil, Brazil has been seeking
to develop alternative energy sources - principally natural
gas and biofuels. The gas industry holds enormous
potential for Brazil, although there is still a long way to go
before it reaches maturity and major investment is
required.