Spaceship Earth requires all those on board to lower, or at least streamline, their patterns of energy consumption-plus shift towards cleaner and better energy sources. That holds especially true of Bric economies, three of whom (that is, leaving aside Russia) are amongst the world?s top-10 energy consumers. They even host 40% of the world?s population, while Brazil, India and China account for 50%-plus of all developing country energy demand.

World Bank calculations suggest that these three economies would be accountable for 42% of worldwide growth in energy demand by 2030. Brazil is already the tenth largest in global energy consumption and the third largest in the Western Hemisphere after the US and Canada.

Little wonder that Brasilia has been hiking energy production?especially oil?and imports of natural gas. The biggest share of Brazil?s energy comes from oil (48%, ethanol included), followed by hydel (35%) and natural gas (7%). The natural gas is deployed thus: Brazil?s industrial sector, the largest consumer, accounts for 80% of domestic consumption. The two fastest growing sectors are thermal power and vehicles using CNG. And, Tupi alone could contain 5-7 trillion cubic feet (Tcf) of recoverable natural gas, which if proven, could increase Brazil?s total natural gas reserves by 50%.

The lattermost just has a small share of total energy consumption, but there are continual attempts to diversify, away from hydropower to gas-fired power plants. That should raise the proportion of natural gas.

There is anyhow plenty of gas to go around: in 2008, it amounted to 12.3 Tcf of proven reserves. But extraction and production has been getting harder, and decelerating?something that will last as long as the sector lacks adequate infrastructure. It also accounts for the low share of natural gas in overall energy consumption.

Going on to the anatomy of the demand for natural gas, that, happily, had been accelerating owing to the high, and rising, price of crude. But even that changes, thanks to the precipitate drop in petro-prices. Gone is the motive force of the seemingly ever-increasing price of crude.

Gone, therefore, also are the favourable price differentials that had been driving the substitution effect. (The only other explanation for delays in substitution would trace to the impossibility of changing fuel sources mid-stream?involving, as

it would, negotiations with fuel suppliers, plus a major re-tooling of the production process.)

Petrobras, with major foreign corporate holdings alongside Brasilia?s, is the largest natural gas producer in Brazil, and also its largest wholesale supplier. The company reportedly controls over 90% of the economy?s natural gas reserves although there are also others like Sulgas and Britain?s BG. Meanwhile, ANP has sought to attract international investment to the sector through the inclusion of gas-rich areas in the recent exploration licensing rounds.

Petrobras is also behind the construction of LNG terminals that would facilitate larger gas imports and reduce dependency on existing import sources.

Finance, though, is the key?and ultimate success depends on the quality of the contractual arrangements for outsourcing. Also of critical importance are aspects like quality of contracted out work, time overruns, and such like. Some Brazilian banks are interested in participating in a new, publicly backed, guarantee scheme for energy efficiency loans; but they charge interest rates that are higher than the developing economy average. Thus, another thorny issue is how to operate restructuring and refinancing schemes cost-effectively, given the structure and culture of banks. How, for example, to provide specialised assistance towards technical and financial quality control to the numerous branches that would extend loans? How to keep down costs?

Yet, even those costs must be contrasted against prospective gains. For, as the Three Country Energy Efficiency Project Brazil Country Report says, the technical potential for electricity savings in all sectors is estimated to be close to Real 5 billion (or, in excess of $2 billion) annually. Then, the public sector alone would achieve annual savings of upto $750 million in power costs via efficiency investments.

Finally, the need and attractiveness of natural gas will neither vanish during the current recession, nor go away once better times return. So, although the appended NYMEX Chart does show a seeming fall-off in the fortune of natural gas that will be amongst the first components to be corrected during any upturn.

In fact, Petrobas plans to meet additional demand by bringing in several new natural gas projects over the coming years. The largest would be the Mexilhao project, with estimated total reserves of 14 Tcf. There are plans to initiate production at 100 Bcf per year this year, and raising that to 180 Bcf per year eventually.

Which brings us, finally, to the economy?s share of gas output from offshore? They are located partly within the Campos Basin (Rio de Janeiro state), while onshore production occurs in Amazonas and Bahia states. (The latter target local consumption mostly, owing to inadequate transport infrastructure.)

In assessment, one could say that things are changing in Brazil which was thought once to be a laggard from amongst the Brics. But what seems to have paid off are its single-minded stress on diversification, and (the recent, post-indebted) choice of stability versus rapid inflationary growth. It is also characterized by a booming commodities export industry?one that is more competitive and less fragile than of many of its neighbours.

Petrobras operates Brazil?s domestic natural gas transport system. The network has over 1,550 miles of natural gas pipelines, mostly in the southeast and northeast parts of the country. In June 2006, China?s Sinopec began construction on the 730-mile Gasene pipeline linking the northeast and southeast networks.

According to media reports, construction of the third and final stage of the Gasene system began in 2008, with completion fo the project expected by the end of 2009. In 2005, construction began on the Gas Unificacao, or Gasun; the 1,400-mile Gasun will link Mato Grosso dul Sul, in southwest Brazil, to Maranhao, in the northeast.

A lack of natural gas transportation infrastructure in the interior regions of the country has hindered exploration and production. In particular, Amazonas state contains considerable reserves that remain unexploited, especially the Urucu field, which contains Brazil?s largest onshore natural gas reserves.

Writer is a fellow at the Maulana Abul Kalam Azad Institute of Asian Studies