Flávia Pierry, Argus Media

RIO
EnergiesNet.com 07 27 2023

Brazilian state-controlled Petrobras’ new business strategy may reduce the natural gas market expansion and delay more developments in the industry.

The company’s new tack of signing long-term agreements with local distributors and reducing gas prices can help large industrial gas consumers reduce final costs by opting to keep supply agreements with distribution companies under regulated tariffs. It also avoids the risks of managing transportation and distribution capacity agreements or other uncertainties in the competitive market, but may also hinder market expansion and delay developments.

Petrobras president Jean Paul Prates spoke frankly about the topic last week, saying the company considers natural gas as a side product of crude production and that there is no need for a new bill to unbundle the gas sector.

“[Petrobras] always chased crude oil, there is nothing detrimental about saying that,” he said. “Gas has always been a side product because in Brazil it is oil-associated. That does not mean it is not valuable or that we will throw it away or withhold it.”

For Prates, Brazil never needed any gas law — such as the one that liberalized the market in 2021 and its previous version in 2009 — as there are laws already in place for upstream oil and gas production. For the downstream sector, especially distribution, Brazil’s constitution defines local monopolies controlled by individual states, which cannot be changed through simple laws and was aimed at allowing for large industrial or power generation gas consumers to subsidize the distribution grid expansion, thus benefiting small and residential consumers.

For the midstream sector, gas transportation only lacked regulation because it is a natural monopoly and is paid with regulated tariffs, Prates said. But he argued that neither of the two gas laws worked, which drove policymakers and market participants to propose changes, such as demanding further unbundling in distribution and the reduction of Petrobras’ share in state distribution companies.

Selling Petrobras’ gas transportation and distribution arms Transpetro and Gaspetro did not solve any of the problems in the gas industry, so the same problems are under review once again, Prates said.

Prates also stood by Petrobras’ reinjection of much of its natural gas production, because much of it is associated with oil output. Of all gas reinjections in Brazil, 40pc are used to increase oil production, and another 40pc is reinjected to avoid having to flare it and create more emissions.

For Prates, policymakers and the government must find a solution to the hurdles faced by the gas industry. Regarding the recently announced federal program Gas for Jobs, under study by the mines and energy ministry, Prates said that Petrobras is not participating in the program’s development and has not received any details on requirements for the company or subsidies. He said Petrobras would participate in the Gas for Jobs discussion if invited.

“The government must always be in movement. They must show that they are working, something new,” he said. “But those actions do not always have an effect. If we are to wait for the government’s movement, [Petrobras] will do nothing, so we will adapt to what comes.”

Prates dismissed talk that Brazil faces difficulties in gas infrastructure, referring to some market participants who argue that producers reinject more gas than needed for repressuring the wells because pipeline capacity shortages.

“There is no outflow pipeline crisis for Petrobras,” he said. “Our plans are organized and transparent.”

argusmedia.com 07 26 2023