New bill to encourage gas imports to Brazil

It’s in the hands of the Chamber of Deputies to evaluate, amend and pass a bill that promises to change the gas industry in Brazil. The New Gas Act aims to open up competition, expand investment and promote consumption. PL 6407/2017 was approved by the Chamber of Deputies, went to the Senate and, on Thursday (10) night, returned again to the Chamber, after being approved by amendments by the Senate. But it is surrounded by questions and divisions in the sector. Thus, it will be evaluated again.

The bill benefits companies aiming to explore natural gas after breaking Petrobras’ monopoly. Brazil has about 9,400 kilometers of gas pipelines, built since the creation of the Bolivia-Brazil gas pipeline during the administration of Fernando Henrique Cardoso in 1999. All of those pipelines belong to Petrobras, which has a monopoly on their use. The new law stipulates that a company that owns the pipeline must allow other companies to use the network as long as they do not harm the owner’s preference and do not pay for the service.

The bill converts the concession model to an authorization model, which will make the process faster and more open. The authorization is given by the on-site oil and gas regulator, PIA. Previously the concession was granted by the Ministry of Mines and Energy, required a tender and was much slower. Now, this will only require a public call and the approval of the PIA, which should be faster.

This monopoly situation has begun to change recently when Petrobras began making part of its infrastructure available to other companies. But the Brazilian infrastructure is small: Argentina has 16,000 kilometers of gas pipelines, almost twice as much as Brazil.

For Congressman Laercio Oliveira, who was chairman of the committee in charge of the bill in the lower house, Brazil is currently ‘far away’ in producing, distributing and trading natural gas. And he says the new bill, if passed, will help the country catch up. ‘This gives the industry legal certainty. Now, gas (which is taken from oil exploitation) is restored to wells due to lack of infrastructure (to bring it ashore). As the law makes export easier, it becomes a highly coveted market, ‘said the congressman.

Most of the gas produced in Brazil comes from the search for pre-salt oil. Due to the lack of market, companies choose to inject gas into the well in order to extract more oil instead of offering it as an energy source.

According to Hirdan Katarina de Medeiros Costa, a professor at So Paulo University’s Institute of Energy and Environment (IEE / USP) and researcher at the Gas Innovation Research Center (RCGI), the bill as it stands now could stimulate gas imports before stimulating infrastructure. national. For that, she says, the gas market needs to be monetized.

‘It will take some time for more players to come to market. Now, Petrobras is giving up assets, which allows for an increased number of suppliers as well as more affordable prices and more customers. In order to build more pipelines, there must be a requirement that guarantees investment and cuts costs, ‘she explains.

Good but timid law

Adriano Pires, partner and founding director of the Brazilian Center for Infrastructure (CBIE), says Brazil needed, in fact, a new regulatory framework for the industry. He believes the new bill is good. But shy.

Pires notes that gas production and distribution technology has come a long way so now we are able to take gas, liquefy it, transport it, then gasify it again at a worthwhile cost. Moreover, shale gas exploration has made the United States the largest producer and exporter of gas in the world.

Now, says Pires, the problem is not the supply problem. ‘One of the requirements. Markets and infrastructure need to be created. And the bill does not encourage any of those things. Stimulation of imports ends’. To advance further, the bill should include items that stimulate the construction of thermal power plants and gas pipelines, Pires says.

According to the director of the CBIE, natural gas is a mixture of energy in transition. Although fossil-based, it is less polluting than other mixtures used to operate a thermoelectric plant, such as oil. It can also be a source of energy as dependence on oil decreases and the use of clean sources such as sun and wind is developed.

Moreover, having thermoelectric plants would help Brazil in two ways. They can be used as a “surplus”, i.e., if the main source fails for any reason, as happened in the power crisis that left Amap without power in November, the power plant begins to supply demand. The other way is to promote the diversification of the energy mix and secure the supply. The water reservoirs used to supply Brazilian hydropower plants are low, and President Jair Bolsonaro has warned of the risk of outage. With gas-fired power plants, this would not be a problem.

As it is, the new bill solves only part of the problem, as all plants can be powered by imported or domestic gas. But Pires believes the bill could be more rounded. ‘If it does not stimulate production, it will stimulate imports. “While there is now a worldwide surplus of gas, companies do not use what is produced in salt before, the country ends up, ‘says Pires.

The Director of Strategy of the Brazilian Association of Gas Distributors (Abegas) and Market Director Marcelo Mendona also believes the bill is positive but still not enough to create demand.

‘Raw salt and other areas of exploration are Brazil’ s sources of wealth that can no longer be spent. Reinjection rates reach 40%. It is not sustainable to continue developing over 40% of national gas production every day at the bottom of the well. It will be fully explored only when there is a strong demand, on the one hand, and sufficient infrastructure to process it and transport it to plants, shops and homes. “So we need to create affirmative policies to encourage players to make investments to really change the current situation,” he said.

Like Pires, Mendona stressed the importance of thermoelectric plants for mixing energy. ‘These plants should be built in the village, thus stimulating the construction of gas pipelines to get energy in some towns and cities that have not yet been serviced. As it stands now, the text aims to boost gas imports. And imported gas does not generate royalties, ‘he says.

Russia has the largest natural gas reserves, at about 35 million cubic meters. It is followed by Iran with 32 trillion cubic meters and Qatar with 24.7 trillion cubic meters, according to the International Energy Agency (IEA). The US ranks fifth, after Turkmenistan, but despite having reserves of 12.9 trillion cubic meters, is the world’s largest producer and exporter of gas. According to the National Petroleum, Natural Gas and Biofuels Agency (ANP), Brazil has proven natural gas reserves at 368 billion cubic meters both on land and at sea, especially in the Amazon.

Although it has large reserves, Brazil imports a large portion of the natural gas it consumes. ‘Qatar is an example of a country that exports its reserves. Here in my state (Sergipe) is a ship that takes gas from Qatar and supplies thermoelectric plants. They import it because Brazilian gas is very expensive, ‘concluded Congressman Oliveira.
Source: Brazil-Arab News Agency (ANBA)