Flavia Pierry, Argus

BRASILIA
EnergiesNet.com 07 18 2022

Do you intend to present a bill to encourage gas injection reduction? What would it look like?

In the first year after the newgas law came into effect, huge advances were made in opening the market, even though gas prices did not fall, as expected, due to the challenging pandemic scenario and the conflict between Russia and Ukraine.

In the current context, we believe it is necessary to create mechanisms to increase gas production and commercialization of greater volumes of national gas, given the increase in LNG prices in the world and the cut in supply from Bolivia.

We are talking to several market participants, seeking to hear ideas and suggestions, making ourselves available to advance a legislative proposal that seems appropriate to them. We certainly do not intend to encumber the producer, nor generate any breach of contractual obligations.

We are analyzing several proposals, such as the reduction of royalties for situations in which the investment in the pipeline infrastructure proves to be economically unfeasible, tax exemptions on investments in outflow gas pipelines and the creation of an independent outflow pipeline agent, which could buy gas at the wellhead to be drained and processed by other agents.

How is your project looking to encourage the construction and operation of gas outflow pipelines?

We need to understand the reasons that make the producer choose to reinject part of thegas produced and create conditions to invert this business logic, always paying attention to technical issues. Certainly, exempting producers from implementing outflow pipeline infrastructure will be one of the points we will have to face. Also, we’ll need to attract other agents, such as investors and infrastructure users, who will provide services or buy gas at the wellhead.

Changes to the transport tariff rules to create a short-haul mechanism are also under discussion. Would this mechanism need to work exclusively inside each state?

We understand this mechanism may be created by the hydrocarbons regulator ANP. Sergipe’s state governor, Belivaldo Chagas, sent a proposal to the agency, accompanied by a study that supports the initiative.

The primary goal of creating a short-distance tariff, known internationally as short haul, is to avoid the direct connection of a source of supply, like natural gas processing units or LNG terminals, directly to a consumer under a bilateral contract. Since this possibility only exists if the source and the consumer are in the same state and aiming not to burden other consumers, the proposal limits this tariff to the interstate context. It is worth mentioning, as an example, in cases where the source of supply and the consumer are close and come to be connected by a dedicated distribution pipeline, there would be no payment for transport and, therefore, there would be no participation of this consumer in the carrier’s authorized revenue distribution.

Short hauls are also used or, at least allowed, in the international regulatory experience, in several countries such as England, Canada the United States and Argentina.

Could all the propositions benefit reduce liquidity and limit operations?

We don’t see it that way. Gas will be available in the transport network to be taken and consumed in any location served by the network. Entrepreneurs will certainly act within a business rationale, seeking the best conditions for their projects, including availability and cost, access to other raw materials, logistics for serving markets and tax issues.

The issue of the difference in ICMS taxation of the states is common and affects many products. It is not specific to natural gas. This should be a part of the tax reform which, as we know, is very necessary, but difficult to address. We do not agree that tax differences compromise the molecule’s liquidity within the pipeline. In the current context, there will certainly be healthy competition between states in terms of regulatory modernization and tax matters, all seeking to attract investments to their territories.

argusmedia.co 07 13 2022