Power move – Delta Energia's strategy for William Arjona as Brazil gas supply heats up

Brazil’s Delta Energia has signed a contract with Galp Energia Brasil to purchase 1.1Mm3/d (million cubic meters) of natural gas for the William Arjona thermoelectric plant in Campo Grande, Mato Grosso do Sul state. 

The fuel will be moved through the pipeline grid of local gas distributor Companhia de Gás do Estado de Mato Grosso do Sul (MSGÁS). 

The agreement, which lasts for 18 months, aims to guarantee the operational activities of the plant, with the possibility of also serving consumers in the free gas market. 

In this interview, the president of generation branch Delta Geração, Alessandro di Domenico, gives BNamericas more details about the agreement and analyzes the gas market.

BNamericas: What is the nature of William Arjona's electricity supply contract? Was it concluded via an Aneel auction? 

Domenico: William Arjona won the first backup capacity auction in 2021, which resulted in a contract for supply from July 2026 until July 2041. 

Until then, we’re in ‘merchant’ mode, with no energy contract signed. We’re available, carrying out tests and investing in improvements. And observing price opportunities for exporting energy to Argentina, for example. 

The ONS [national system operator] has already said that the thermal plants will need to be available this half. If the ONS asks for us to be activated, it will pay us on the spot market, considering the CVU.

Editor's note: The CVU, or unit variable cost, is the amount needed to cover the variable operating costs of a given plant. 

BNamericas: Does the contract with Galp guarantee 100% of the plant's supply?

Domenico: This contract comes just before the start of the long-term contract we signed in the 2021 auction. It brought innovations, it's a two-way street: I can buy as well as sell. If we have gas from another contract, like ours with Bolivia, I can bring that gas and sell it to Galp. 

We have other gas supply contracts under negotiation to meet our long-term contract [for supply of electricity from William Arjona]. 

Delta's William Arjona thermal plant

BNamericas: Has the scenario for buying gas improved in Brazil in recent years? Is the price of the gas competitive?

Domenico: A more suitable modality is being constructed for the backup capacity contract, which has the ability to be firm but flexible. The gas suppliers understand this and assess which risks can be taken by each party in order to have a competitive product for the auctions. 

Editor’s note: Backup capacity contracts are designed to assure potency for the national power system, calling for the activation of plants only at times of supply shortage, such as during dry periods or peak consumption hours at the end of the day, when solar power is not available. 

BNamericas: How do you see the possibility of Argentine gas entering the country, especially in light of plans by federal company Petrobras to increase gas supply, starting with the Rota 3 pipeline, which will come into operation soon. 

Domenico: The arrival of gas from Argentina is inevitable, given the decline in production in Bolivia. There are companies that are already offering gas products from Argentina to Brazil from 2025. This is starting to become a reality when it comes to the regulatory and political arenas, with some issues still to be resolved regarding transportation, especially in Bolivian territory. 

This is in addition to large new supply of gas that is about to come in, linking production points in the sedimentary basins connected via Rota 3.

The gas is coming from both sides, from the west and the east. This is very good because it brings competitiveness, security, reliability and, above all, maturity to a market that has the role of [energy] transition and will greatly help energy security and industry, with prices that should be competitive. 

BNamericas: Are you considering taking part in the next backup capacity auction?

Domenico: The Delta group is weighing it up, but has yet to decide. If it occurs, participation would be with a new greenfield thermoelectric project.