Brazil urged to develop fuel contingency plan

Stock levels of S10 diesel in Brazil increased by 20% in 2023 but the country still needs a structured contingency plan to guarantee supply, Marcus D'Elia, a partner at consultancy Leggio Consultoria, told BNamericas.

S10 diesel contains 10mg of sulfur per kg of fuel and represents around 70% of the diesel sold, according to regulator ANP. 

D’Elia said stock levels are sufficient to guarantee regular operation and avoid supply problems, but no progress has been made in strategic planning for situations where there are severe restrictions on the international movement of oil and fuel.

"Given that the international scenario continues to be very unstable, there should be concern about moving forward with actions that can increase the resilience of supply, especially of diesel, in the country," he said.

Last week, ANP released its monthly supply reports for 2023, which also detail possible supply restrictions and the actions taken by authorities and the market to mitigate the risks. 

In all cases, actions were sufficient and prevented shortages, the report said.

But cases from December related to supply of refinery products in the northeast – covered by Mataripe (Refmat) in Bahia and Clara Camarão (RPCC) in Rio Grande do Norte – and in the north, covered by Ream, still deserve attention, according to ANP.

RPCC, operated by 3R Petroleum, experienced gasoline supply difficulties, and supply had not been normalized when the latest report was finalized. 

Although RPCC's production is relatively low, it accounts for 42% of the gasoline delivered to Rio Grande do Norte. Federal oil company Petrobras' Guamaré unit supplies the balance. 

ALE, which was the first company to report problems at the refinery, buys around 7% of Petrobras' supply and 7% of RPCC’s. 

The delay of a ship, added to the difficulties in specifying the products, meant that regional distributors, especially ALE, were restricted in terms of volume. 

ANP continues to monitor supply and follow the operations of regulated agents as the situation in the north develops. 

According to a study by Leggio, regions that are more distant from production centers and stockpiles, such as the northern states, are more vulnerable to events that could restrict the movement of products.

D'Elia highlighted that the country should create a contingency plan focused on recurring risk situations and which does not just involve the use of stocks, but offers other solutions, like actions to increase the resilience of logistics chains and the definition of alternative supply routes. 

Such a plan would mitigate the risk of disruption in fuel supply even when a drought is more intense than expected, as recently happened. 

"Furthermore, given that we import around 23% of the volume of diesel we consume, the increase in global instability makes it even more important to draw up a structured and more comprehensive logistics plan for national supply," said D'Elia.