"We do not want to be dependent either on Bolivia or on the United States."

The construction of the 186-mile pipeline was begun in the city of Serra, 21 miles from the capital of Espiritu Santo state.

Brazil's concerns about energy self-sufficiency have been buoyed since December, when state oil company Petrobras reported the discovery of a huge new offshore oil field off the coast of Rio de Janeiro state. The Papa-Terra field is located in the Campos Basin, which is already Brazil's most important oil-producing region.

The optimism was tempered, however, by new Bolivian President Evo Morales' May 1 announcement that his government was naturalizing Bolivia's natural gas infrastructure, which Petrobras had invested heavily in. Petrobras subsequently announced that it was suspending further investment in Bolivia.

Brazilian natural gas imports from Bolivia account for 60 percent of its consumption and come via a 2,000-mile pipeline.

The new pipeline will run between the cities of Cabiunas in Rio de Janeiro state, and Vitoria, capital of Espirto Santo. It is scheduled for completion by October 2007.

The pipeline, with a capacity for transporting up to 705,000 cubic feet of gas per day, is the first stage of the larger Southeast-Northeast Gas Pipeline project, or Gasene, which will eventually cover 852 miles.

In a first for Brazil, the Gasene project is a joint Petrobras-Sinotec venture.

Lula said that the Chinese company -- after many difficulties -- managed to join Petrobras in "matrimony. We had two years of hard work with the Chinese to set up this association. We are going to tie Espiritu Santo gas to the development of northeast Brazil -- there will be a thousand and some kilometers of gas pipeline that will directly and indirectly create thousands of jobs."

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