Brazil moves to curb gas prices

Brazil’s oil and gas regulator ANP has ordered federal company Petrobras to contract a larger maximum capacity of around 13Mm3/d (million cubic meters per day) at the Caraguatatuba gas treatment unit (UTGCA) reception point, in São Paulo state.

Currently, Petrobras contracts 7.6Mm3/d. The aim is to reduce the impact of the increase in the rate for the use of the gas transportation system operated by Nova Transportadora do Sudeste (NTS) as a result of the company's capacity offering process.

As Petrobras is the largest capacity contractor, the reduction in its demand has a significant impact on the NTS system, whose rate is basically calculated by dividing the value of infrastructure by contracted capacity, meaning the rate rises when demand falls.

The expectation is that the mandated change in capacity contracted by Petrobras at UTGCA will reduce the current NTS rate by around 10%.

At the beginning of June, NTS raised its transportation rate by 26% because demand for the fuel would be lower than projected. 

The announcement generated negative repercussions among gas producers and consumers, as well as authorities from the ministries of mines and energy, development, industry and trade, and the chief-of-staff's office. 

According to a source with knowledge of the matter, the increase occurred mainly because Petrobras said it would contract a lower capacity than usual, both at UTGCA and at the Cabiúnas terminal (Tecab), in Macaé, Rio de Janeiro state, where it contracts 6.5Mm3/d, a volume which, so far, is maintained.

According to the source, who spoke to BNamericas on condition of anonymity, Petrobras requested less capacity because it fears ANP may discontinue a waiver to inject ethane into the NTS system, which it cannot separate from natural gas due to the limitations of the treatment units. 

In a letter sent to ANP on July 3, the forum of business associations for the development of the natural gas market (Fórum de Gás) questioned why the agency did not also determine an increase in the capacity contracted by Petrobras at Tecab. 

The letter said the capacity used by Petrobras at the terminal in Macaé and publicized by NTS is "far superior" to that indicated by the company in the NTS bidding process. 

"It seems to us that Petrobras was allowed to transfer its contractual commitments as primary shipper to the new shippers, increasing the cost of access to transportation by means of an undue benefit: a reduction in the amount to be paid by Petrobras via legacy contracts," the letter said.  

In Brazil, shipper refers to the agent who uses the service of handling natural gas in a transport pipeline, subject to ANP authorization. 

Responding to a request for comment by BNamericas, Petrobras said, "the assumptions adopted by Petrobras for the capacity reserve at the Caraguatatuba and Cabiúnas receiving points were shared with ANP and NTS.  Petrobras has not changed these reserves since signing the flexibility reduction agreements with TAG [Transportadora Associada de Gás] and NTS in 2021 and 2022, respectively."

It added, "in the case of the Caraguatatuba receiving point, Petrobras' reserve takes into account the fact that ANP special authorization 836/2020, which allows for a greater supply of natural gas at that location, establishes the need for four-monthly assessments, which may be revoked. As this authorization has been maintained since then, supply at that point has been higher than the volume originally considered by the company. In this sense, since the aforementioned authorization is expected to continue, Petrobras' reserve adjustment was implemented.

"In the case of the Cabiúnas receiving point, the movement in excess of the capacity reserve indicated by Petrobras is due to the fact that the interconnection between the TAG and NTS gas carriers in that location has not yet started operating, which leads to a distortion of the volumes injected into the TAG and NTS systems. The sum of the volumes owned by Petrobras processed at Cabiúnas gas treatment unit (UTGCAB [Tecab]) and injected into the TAG and NTS transportation systems is consistent with the sum of Petrobras' capacity reserves at the Cabiúna reception points."

Controlled by Brookfield Asset Management, NTS operates more than 2,000km of gas pipelines linking the states of Rio de Janeiro, Minas Gerais and São Paulo, which account for around 50% of gas consumption in Brazil, to the Bolivia-Brazil gas pipeline (Gasbol), LNG terminals and gas processing plants.