The lower house of Brazil’s congress has approved the country’s new natural gas law in a vote that ended in the early hours of Wednesday. It now has to be signed off by President Jair Bolsonaro.
The measure changes the legal framework for natural gas transportation services and pipeline construction, replacing concessions with an authorization model to simplify the process, as well as stipulating mechanisms to deconcentrate the market, which is currently controlled by Petrobras.
The rapporteur of the federal bill (4.476/2020), Laercio Oliveira of the Progresistas party (PP), recommended the rejection of all amendments made by the senate. According to the legislator, they would have entailed damaging changes to the text, “jeopardizing the agreement reached with difficulty with the natural gas industry.”
“Even though the opening of the market has already begun regardless of the new law, as in the case of TBG [Transportadora Brasileira Gasoduto Bolívia-Brasil]’s entry and exit contracts, we believe the new framework will provide the necessary legal security for investments to be made in the sector and greater opening of the market,” Juliana Pizzolato, a partner at law firm Kincaid Mendes Vianna, told BNamericas.
Tiago do Monte Macêdo, a partner at Tauil & Chequer Advogados, told BNamericas that the new framework is expected to stimulate the growth of incipient markets in Brazil, including the transportation and commercialization of compressed and liquefied natural gas and other types of logistic models, enabling producers, importers and traders to access the local consumption market with new onshore and offshore investments.
Following the approval of the bill, the mines and energy ministry (MME) authorized Shell Energy, Gas Bridge and Gerdau to import a total of 66Mm3/d by 2024. Shell and Gas Bridge, which have bought Enauta’s and Geopark’s shares in the Manati field, were authorized to bring in gas through Petrobras’ LNG terminal in Bahia state, and Gerdau, via the Gasbol pipeline.
In 2020 alone, the MME issued 30 natural gas import authorizations, more than in the previous seven years combined.
Regarding possible lawsuits involving state gas utilities, which have monopolies in piped gas distribution, Macedo stated that the bill maintains the power of the states to legislate on this issue.
According to Rio de Janeiro industrial association Firjan, the new business environment could attract 80bn reais (US$14.3bn) in investments nationally and increase gas consumption in Rio state Rio by 13Mm3/d as a result of greater industrial use and the deployment of vehicular natural gas projects for heavy vehicles.
GAS PROJECTS IN THE PIPELINE
The regulatory changes could help unleash gas-rich upstream undertakings like Equinor’s BM-C-33 (Pão de Açúcar discovery) development in the Campos basin and contribute to the revitalization of the Peroá and Cangoá fields in Espírito Santo state, recently acquired from Petrobras by 3R Petroleum and DBO Energy.
“All of the projects that relied on the sale of gas to Petrobras to be feasible can now be planned considering sales to third parties,” Thiago Luiz Silva, of law firm Vieira Rezende, told BNamericas.
“Other examples include the Golfinho and Camarupim hubs, as well as future divestments in Campos that use the Cabiúnas UPGN [natural gas processing unit],” he said.
He added that the possibility of third-party access to LNG terminals/FSRU (floating, storage, regasification units) is of utmost importance. There are currently limited slots for FSRUs at Brazilian ports, with additional room depending on large investments.
“This previous limitation meant only the leaser of the FSRU was eligible to use the regasification terminal,” Silva said. “Now, in the case of GNA [Gás Natural Açu], for example, the local FSRU may be used by any gas company to inject the energy source into the grid.”
The three LNG terminals that are currently operating in Brazil are located in Guanabara Bay (Rio de Janeiro state), Baía de Todos os Santos bay (Bahia) and Pecém (Ceará). All are operated by Petrobras, which is holding a tender to lease the Bahia unit.
Celse’s terminal in Barra dos Coqueiros, which is part of the Porto de Sergipe thermoelectric project, is in the pre-operating stage.
Celba, Golar Power’s terminal in Barcarena (Pará state) and the Comgás (Compass) terminal in Santos (São Paulo) are under construction.
Under study is Golar Power’s Gás Sul terminal in Babitonga Bay, in Santa Catarina state, which comprises a floating, storage and regasification unit.
Juliana Pizzolato highlighted that the new regulatory framework is expected to foster the development of a more dynamic gas market, with cheaper gas allowing large industries that are using coal or other polluting fuels to migrate to natural gas, encouraging the expansion of the pipeline network.
According to Brazilian energy research company EPE, there are 11 gas transportation pipeline projects under study, involving estimated capex of approximately 17bn reais (US$3bn).
Source: EPE
Another potential beneficiary ofthe new rules is Macro Desenvolvimento’s 2.6bn-real UPGN P-roject in Presidente Kennedy municipality, Espírito Santo state. lt would be supplied via the 119km Rota 6a offshore pipeline, which EPE h as mapped out as a preliminary project. With the capacity to transport 12Mm3/d, the 2.5bn-real undertaking would be able to export production from the ltapu and Wahoo fields in the Campos basin.
Source: BN Americas