Petrobras Responds to Preliminary Injunctions on Gas Contracts

(Petrobras, 30.Dec.2021) — Petrobras was notified, on this date, of preliminary decisions rendered by the Court of Justice of the State of Rio de Janeiro that determined the maintenance of the conditions of the contracts entered into between Petrobras and state distributors (CEG and CEG RIO), which will expire on 31 December 2021, preventing the adjustment of prices to the current reality of the gas industry as of January 2022.

Similar preliminary injunctions were also issued to maintain the contractual conditions relating to the distributors CEGÁS (Companhia de Gás do Ceará), SERGÁS (Sergipe Gás SA) and ALGÁS (Gás de Alagoas SA), whose respective contracts also expire on 31 December.

Petrobras clarifies that it meets its gas sales contracts through a portfolio of offers made up of domestic production and imports of gas from Bolivia and liquefied natural gas (LNG). The high demand for LNG and limited international supply resulted in a significant increase in the international price of the input, which rose by around 500% in 2021.

For several months, Petrobras has been engaged, in good faith, in negotiating new contracts with several distributors. To offer better conditions to customers, Petrobras offered natural gas distributors products with terms of 6 months, 1 year, 2 years and 4 years and contractual mechanisms to reduce price volatility, such as, for example, reference indexes linked to LNG and Brent, installment option and possibility of reducing volumes in longer term contracts.

However, despite the negotiation process carried out between Petrobras and the distributors, as foreseen in any commercial relationship and in compliance with what is established in the Public Tenders, Petrobras was surprised by the judicialization of the matter.

Petrobras understands that these decisions undermine the legal security of the business environment, interfering with the free formation of prices, putting at risk the implementation of the opening of the natural gas market in Brazil and the attraction of investments in the country.

To exemplify the competition that has emerged in the market, it is possible to mention several pieces of news about the existence of contracts effective from 1 January 2022, signed by distributors and free consumers with other suppliers, such as Shell, Petrogal, Potiguar E&P, among others. In addition, these producers signed contracts with TAG to take their gas to the consumer market.

The company will adopt all applicable legal measures in relation to the reported legal cases.