Brazil Petrobras Starts Output At Bolivia's Itau Natural-Gas Field

RIO DE JANEIRO -(Dow Jones)- Brazilian state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, said Tuesday that it started production on Feb. 2 at the recently acquired Itau natural-gas field in Bolivia.

Petrobras acquired a 30% stake in the field late last year from France's Total SA (TOT, FP.FR), with Bolivia's government approving the transaction Jan. 31. Initial production at Itau is expected to be between 1.0 million and 1.5 million cubic meters a day, Petrobras said.

The federal oil company's decision to expand its presence in Bolivia was a mild surprise when the deal was first announced in December. Petrobras lost some facilities when Bolivian President Evo Morales nationalized the Andean nation's natural-gas industry.

From an operational perspective, however, the deal makes sense. Petrobras can squeeze synergies out Itau's location near the San Alberto and San Antonio natural-gas fields, which the company also operates. Natural gas from Itau will be treated at San Alberto's facilities, the company said.

Total retains a 41% stake in the field, with BG Bolivia Corporation-Bolivian branch holding 25% and state-run natural gas company YPFB Chaco holding 4%.

Bolivia is a key supplier of natural gas to Brazil, supplying about 30 million cubic meters per day via pipeline. About 70% of the natural gas consumed in Sao Paulo, Brazil's industrial hub, comes from Bolivia.

Brazil, however, had sought to reduce its dependence on Bolivian natural gas in recent years, given some vandalism-related supply disruptions and other headaches related to nationalization of the Andean country's gas reserves.

The Brazilian and Bolivian governments tussled over Bolivian President Evo Morales' decision to nationalize the country's gas fields in 2006. Bolivia's government seized control of natural-gas facilities and pipelines owned by Petrobras during the nationalization.

Bolivia also raised the price Brazil paid for imported natural gas.

For its part, Bolivia's economy depends heavily on exports of natural gas--and the country is keen to increase production. But private companies have been reluctant to invest in Bolivia, given uncertainties surrounding nationalization of Bolivia's natural resources.

(Source: http://www.foxbusiness.com/markets/2011/02/15/brazil-petrobras-starts-output-bolivias-itau-natural-gas-field/)