Brazil's remote Amazonas state is in the throes of a political dispute over the opening of the natural gas market, a move that proponents say would unlock substantial reserves.
State lawmakers approved legislation on 8 April that would regulate gas production and end the monopoly of state-controlled distributor Cigas.
Among the potential beneficiaries of the opening is Russian state-controlled Rosneft, which holds 13 undeveloped gas blocks covering about 32,600km2 (20,256mi2) in the Solimoes basin of Amazonas.
The speaker of the state assembly, Josue Neto, issued an ultimatum to Amazonas governor Wilson Lima this week that his 6 May veto of the legislation would be overturned unless his legislative allies present an alternative bill by 30 June. Neto contends that upstream acreage in the state will be excluded from upcoming licensing rounds if the law is not approved soon.
During recent public hearings on the bill, Brazilian energy company Eneva, which plans to liquefy gas from the Azulao field in Amazonas for its 117MW power plant in Roraima state, said it supports the legislation, though it sees room to improve tariff calculations. Eneva highlighted that the lack of adequate state regulations resulted in a 42.7pc decline in the state's proven reserves in 2009-18.
BR Distribuidora, Brazil's largest fuel distributor, said the law would mark "important progress," adding that it is evaluating new business opportunities in gas and LNG distribution in the state.
Forum do Gas, a business lobbying group, said the new law would reduce gas prices and boost investment. The association highlighted that while Amazonas accounts for 13pc of total gas production in Brazil, it is reinjecting up to 50pc of production.
Rosneft did not weigh in at the hearing, and could not be reached for comment. In May 2020, the company excluded its Amazonas acreage from its 2020 investment plans after completing seismic surveys and four exploration and appraisal wells in recent years.
Cigas argued in the hearing that the legislation needs to be re-evaluated. This sentiment was echoed by Brazil gas distributors association Abegas, which maintained that more analysis is needed. The governor justified his veto by arguing that Cigas' concession could be hurt by the new law.
In April, the Solimoes basin produced 14.22mn m3/d of gas, of which 6.5mn m3/d was reinjected, according to hydrocarbons regulator ANP. Brazilian state-controlled Petrobras is the main operator in Solimoes. Gas from the basin is transported through the 663km Urucu-Manaus pipeline operated by TAG, which is controlled by French energy company Engie.
Cigas distributes gas to 13 thermoelectric plants in six state municipalities as well as 50 industries in the state's duty-free zone and a growing number of residential and retail clients.
