(Argus, 25.Jun.2019) — Brazil’s national energy policy council (CNPE) approved regulations that will open the country’s natural gas market and reduce the dominant position of state-controlled Petrobras.
The new regulatory framework, which was announced in April, would end Petrobras’ monopoly in gas production and distribution, with the goal of reducing energy costs and revitalizing the economy.
In practice, the regulations would increase third-party access to gas pipelines, LNG regasification terminals and gas processing units.
The program also aims to expand investment in gas-fired thermoelectric generation to make the power grid more reliable in the face of increased intermittent wind and solar generation. The regulations are also designed to help monetize rich gas associated with crude in giant pre-salt reserves.
The CNPE resolution recommends that Petrobras define how much of its gas processing and transport capacity it will need, to allow third parties to access the unused capacity.
Later this week, Brazil’s anti-trust regulator Cade will rule on anti-competitive practices by Petrobras in the gas market and is likely to recommend that Petrobras exit both the gas transport and distribution businesses altogether. Currently, Petrobras owns stakes in 19 state gas distribution companies through its subsidiary Gaspetro.
Petrobras is expected to sign an agreement to end anti-competitive practices in this market to avoid a fine from Cade.
The regulations are also designed to increase gas production and diversify sources of gas by removing restrictions on unconventional gas production in Brazil and boosting pipeline gas imports from Argentina.
Mines and energy minister Bento Albuquerque highlighted that the plan is expected to usher in R34bn ($8.9bn) in investment in gas infrastructure through 2032. He estimated that a 10pc decrease in gas prices would increase industrial GDP by 2.1pc.
The federal government will also offer incentives to states that are willing to break up their gas distribution monopolies and regulate the creation of gas markets to allow buyers and sellers to negotiate supply contracts. Economy minister Paulo Guedes said several states, including Rio de Janeiro, are interested in working with the federal government in this vein.
Albuquerque will present the sweeping regulatory proposal to the congress today and will make recommendations regarding possible changes to proposed legislation currently under debate.
Brazil’s gas distributors association (Abegas) said that while it is in favor of initiatives that improve competition in the gas market, it is “concerned” about possible changes to gas regulations that could have an impact on existing concession contracts.
Petrobras is in the throes of a wide-ranging divestment campaign that includes gas pipelines and refineries. The company has said it will focus on its core business of developing extensive offshore crude reserves.
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