Brazil’s congress approves natural gas legislation

Brazil's lower house of congress approved long-awaited legislation designed to expand competition in the natural gas market as state-controlled Petrobras rolls back its traditional monopoly.

In a victory for industry, the lower house rejected amendments to the legislation made by the senate late last year that would have allowed companies that received authorization to build new pipelines, but have not started construction, to maintain their concessions.

The bill has strong support from gas-intensive industries, such as ceramics and fertilizers manufacturers, as well as big companies that are preparing to market their gas directly to consumers.

The government hopes to unleash midstream gas investment with the new law, which converts a concession contract model for new pipelines into a more streamlined authorization model, and also facilitates third-party access to pipelines, gas treatment facilities and regasification terminals. Under the new legislation, the hydrocarbons regulator (ANP) will determine the maximum pipeline tariff, but the agency will no longer manage open seasons for pipeline access.

The bill, which Brazil's president Jair Bolsonaro is expected to sign into law shortly, does not alter states' control over gas distribution, which is guaranteed by the constitution. As a result, states interested in developing their local gas markets need to pass their own legislation. States including Sergipe, Espirito Santo, Amazonas and Rio de Janeiro have already passed new regulations which allow large consumers to purchase gas on the open market.

The legislation prohibits gas producers and resellers from owning gas transport infrastructure.

The government is projecting that investment in the sector will reach R60bn ($10.6bn) over the next five years with the approval of the law.

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