Petrobras reduced gas shipments to Sao Paulo state distributor Comgas and to Rio de Janeiro state's CEG and CEG-Rio last night, but restored supplies to the Rio state clients today after the court decision.

Petrobras said the trimming was needed to meet commitments under a deal to supply thermoelectric power plants, Reuters reported.

However, National Grid Operator ONS rushed to deny that need was caused by a shortage of hydroelectric energy, which accounts for some 85% of Brazil's power generation. Gas-fired plants are normally used as back-up during the dry season.

The ONS said it kept a few gas-fired plants running in the past few days "for economic merit" after the price of water-based energy rose at the end of the dry season.

Analysts have long been warning of an insufficient amount of natural gas for Brazil's growing market, saying that this shortage is contributing to rising risks of power rationing in the next few years.

Analysts blame poor planning at Petrobras, which led to what some call "overbooking" of natural gas supplies, selling them to the industry for market prices instead of reserving gas for power plants at fixed low prices under an old federal plan.

Brazil’s current gas supply capacity is just above 50 million cubic metres per day, about half brought from Bolivia and the rest produced by Petrobras. Petrobras plans to boost gas output by nearly 30 MMcmd in 2009 and build regasification terminals to bring in at least 20 MMcmd in liquefied natural gas.

After Bolivia nationalised its gas and oil industries in May 2006, the failure of Brazil to develop its own gas reserves and the risks of energy rationing as early as 2010 has come under the spotlight. Brazil suffered energy rationing in 2001, brought about by droughts and years of poor planning.

Published: 31 October 2007 18:59 GMT  | Last updated: 31 October 2007 18:59 GMT