Brazil's imports of Bolivian natural gas sank to 14.54mn m3/d in January, the lowest level since Brazil's mines and energy ministry began publishing monthly reports in 2007.
Imports from Bolivia in the first month of 2017 were less than half the 31.7mn m3/d recorded in in January 2016 and off from 18.2mn m3/d in December 2016.
The declining imports coincide with weak Brazilian gas demand and advanced negotiations to renew a supply contract that expires in 2019.
Brazilian state-controlled Petrobras is unlikely to renew the 20-year take-or-pay contract at the current minimum volume of 24mn m3/d, partly because Bolivia is not believed to have sufficient reserves to sustain it, but also because Brazil is increasing its domestic production and Petrobras itself is cutting back on its gas business.
In addition to the decline in pipeline imports, send-out from Brazil's three LNG terminals slid to just 1.86mn m3/d in January 2017, compared to 14.07mn m3/d a year earlier. LNG send-out recovered slightly from December, when it totaled 1.40mn m3/d.
Gas demand from thermal generators fell in January to 23.74mn m3/d, compared to 39.52mn m3/d in January 2016, reflecting a recovery in Brazil´s hydroelectric supplies.
For the fifth consecutive month, the Pecem LNG terminal in the northeastern state of Ceara received all of the LNG imported in January. In January 2016, send-out at Pecem averaged 2.79mn m3/d.
The Bahia terminal in Bahia state has been idle since September 2016, while the Guanabara terminal has been idle since April 2016.
Petrobras, which owns the three regasification terminals, has been trying to sell Pecem and Guanabara since last year.
The company is under pressure from Mato Grosso do Sul state, which has seen its tax revenues plummet because of the decline in pipeline gas imports that pass through it. Bolivia's hydrocarbons minister Luiz Alberto Sanchez Fernandez said Petrobras has promised to submit a projection of its future gas demand sometime this month.
Bolivia wants to market gas directly to Brazilian companies and many retail gas distribution companies such as Comgas could be interested, because they have been unable to expand their customer bases on a lack of gas.
In January, Brazil's total gas demand reached 72mn m3/d, compared to 88.17mn m3/d in January 2016. The ministry attributed the decline to lower thermoelectric dispatch.
Thermoelectric dispatch plunged 31pc year on year to an average of 7,702MW in January, the lowest level since September 2012, according to the national systems operator (ONS).
In February, thermal generation was down again to an average of 7,364MW, 26pc lower than February 2016, according to the ONS.
Brazil's domestic gas production declined 1.6pc to 109.9mn m3/d in January from December, when output reached a record 111.77mn m3/d, but was up from 97.25mn m3/d in January 2016.
The ministry highlighted that a combination of higher production and a decline in reinjection allowed domestic producers to offer 59.16mn m3/d of domestically produced gas to Brazilian consumers. This compares with 47.82mn m3/d in January 2016.
Looking ahead, the outlook for gas imports remains unclear. Brazil is currently ending its rainy season and precipitation in January and February was below historical averages in the main southeast/center-west grid, which holds roughly 60pc of Brazil´s installed generating capacity.
In its most recent meeting held on 8 March, Brazil's electricity monitoring committee (CMSE) warned that "unfavorable" precipitation could increase the need for thermal power during the dry season, pushing up electricity costs this year.
Hydroelectric reservoir levels in the southeast/center-west grid rose by 1.3 percentage points in the first three weeks of March to 41.5pc of capacity, according to the ONS. Reservoirs in the region are expected to reach 42.7pc of their maximum by 31 March.
Hydroelectric reservoirs in the drier northeastern grid are also expected to remain practically flat this month, with water levels reaching 21.3pc of capacity on 31 March, up from 20.8pc on 28 February 2017.
The dry northeast region will likely be the first to dispatch high-cost fuel oil and diesel-fired thermoelectric plants this year, on top of its increase LNG imports for gas-fired units.
In addition to the dry weather, electricity demand in Brazil is finally rebounding after nearly two years in decline. Electricity demand increased by 2.2pc year on year in February, according to preliminary estimates by the ONS.
