(WoodMac, 6.Aug.2019) — Brazil’s natural gas market reforms have taken a major step forward, with plans in place which are set to open up opportunities across the gas value chain, and boost investment in the country’s pre-salt.
Last month, the National Council for Energy Policy (CNPE) unveiled its roadmap for opening the gas market to third-party investment, which, it hopes, will drive gas prices down by increasing competition along the gas value chain.
The plan includes granting third parties access to transportation and allowing producers to sell gas output to companies other than Petrobras.
Mauro Chavez, principal analyst, Latin America gas and LNG, said: “One of the biggest barriers to major E&P investments in Brazil to date has been limited gas management options within the country.
“Now that transportation is open to third parties, new monetisation options exist, such as selling to local distribution companies (LDCs), power plants in the transport grid and industrial users.”
He added: “Once access to gas transport capacity is granted, demand recontracting will help drive opening the Brazilian gas market. In the next five years, all LDCs and more than 9 gigawatts (GW) of thermal power plants will need to sign new gas supply agreements.”
As part of the reform programme, state-controlled Petrobras submitted a cease-and-desist agreement to the Administrative Council for Economic Defence earlier this month. The agreement outlined moves to reduce the company’s position in the Brazilian gas market, including asset divestments and gas commercialisation.
Petrobras agreed to declare its maximum injections and retirements in each entry-exit zone, allowing third parties access to remaining transport capacity. However, it will continue to control existing gathering and processing infrastructure.
Mr Chavez said: “Ultimately, Petrobras’ role will change from being responsible for gas supply security, to maximising the value of its own gas portfolio and capital expenses.
“There are M&A opportunities as Petrobras is committed to divest from LDCs and pipeline transport, which includes selling its major stake in TBG.”
He added: “These new policies will set a new competitive environment for gas commercialisation. The first test will be Bolivian gas recontracting and later domestic gas from other pre-salt producers.”