Brazil working to further open domestic gas market

Brazil’s mines and energy ministry (MME) has requested that oil and gas regulator ANP prioritize the regulation of the so-called “gas release program” with a view to decentralizing the supply of natural gas and promoting competition. 

The gas release requires companies that control more than 50% of the national gas market to take part in compulsory auctions, offering part of their gas to other players. In addition, these firms will not be able to buy gas from other producers or import it, under penalty of cancellation of the contracts.

In the government’s view, recent efforts to open up the gas market – such as Petrobras’ mandatory divestments and the new gas law – have not managed to effectively break the state-run firm’s quasi-monopoly. 

However, the federal oil giant still maintains a dominant position in the upstream, midstream and downstream segments. 

Among the challenges to diversify the market are the lack of clear rules for third party access to essential gas infrastructure, such as pipelines and processing units, which are mostly owned by Petrobras. 

The government is betting on programs such as Gás para Empregar (Gas for Employment) and Gás para a Indústria (Gas for Industry) – the latter created with contributions from industrial associations such as Firjan – to encourage development of the gas market. 

On the supply side, Brazil is increasing gas deliveries to the market via the Rota 3 pipeline and processing unit, which began operating last month, and upstream projects such as Equinor’s Raia and Petrobras’ Sergipe Deepwater (SEAP). 

Meanwhile, Brazil is in talks with Argentina and Bolivia to import more gas. 

The country has also recently gained three new liquefied natural gas (LNG) terminals that work as a critical backup. 

In terms of demand, the strategy is to have sectors like fertilizers and the chemicals as vectors of additional consumption. 

According to the latest data from the MME, Brazil produced 150Mm³/d of gas in June, but only 43Mm³/d reached the market. 

The difference is due to the volumes that are reinjected in order to recover more oil and those that are consumed by the platforms themselves. 

The imported volumes amounted to 15.8Mm³/d in the period (13.1Mm³/d from Bolivia and 2.6Mm³/d regasified). 

National gas demand in June was 58.4Mm³/d, of which 38.6Mm³/d was consumed by the industrial sector and 10.9Mm³/d by the electric power sector. 

The government’s focus on industry as a gas demand vector is, at the same time, a strategy to foster the country’s industrialization and assure firm demand, since demand in the electric power sector is seasonal, varying according to the availability of hydroelectric generation.