Q&A: Urca Energia bullish on Brazil biogas outlook

Brazilian energy company Urca Energia is gearing up to become one of the country's leading biogas producers. In an interview with Argus, Urca executive director Marcel Jorand shared his outlook on the potential of Brazil's biogas industry and the company's plans to expand in this market. The text has been edited for clarity and brevity.

Brazil's biogas industry has developed quickly over the past year. How does Urca see it evolving in coming years?

We estimate that Brazil is currently only taking advantage of 2.5pc of its biogas potential, so there is immense capacity to expand.

The Brazilian agribusiness sector has the potential to produce much more biogas from bio-digesters. And now, with the new basic sanitation law, new landfills and solid waste management facilities will bring an enormous number of biogas projects on line. We see the potential for the installation of many small-scale biogas plants, which can either generate power or produce biomethane.

How does new legislation for landfills and basic sanitation change the outlook for the biogas sector?

Brazil still has large-scale open air garbage dumps for urban areas. But with new laws, we hope these places will cease to exist.

New, modern landfills are prepared to receive garbage. They have an impermeable layer at the bottom to eliminate contamination. Once these landfills are sealed, they become the perfect environment to produce biogas and biomethane.

The new basic sanitation law also addresses sewage treatment, which is another potential source of biogas production.

Does Urca plan to make investments in the assets it recently acquired?

We already own the largest biogas producer in Brazil, which is located at the Seropedica landfill.

With the acquisition of Gas Verde, we plan to increase output from 120,000m2/d to 200,000m3/d over the next 24 months.

In the middle of the year, we will begin construction of the biomethane plants at the Sao Goncalo and Novo Iguacu landfills. These plants already produce biogas, which is used for power generation, but will begin producing biomethane. By 2024, we expect to be producing 400,000m3/d. In parallel, we plan to expand to new states and to other landfills, but also into new segments, such as biogas production from sewage treatment and from the by-products of ethanol production.

How does the price of biomethane compare to natural gas?

Petrobras is going to raise natural gas prices in Rio de Janeiro as soon as the court injunction is overturned. Once that price increase takes place, our biomethane will be very competitive.

But we do not want to compete with natural gas, diesel or gasoline — we want to provide a renewable product with a more predictable price, which is indexed to local inflation, rather than international oil prices.

Has demand for biogas increased as businesses seek to decarbonize their operations?

Demand for biogas is much greater than supply – we have many more potential clients interested in biomethane that we can currently supply. This is why we are seeking new sources of biomethane. We already sell to (beverage company) Ambev, which has plants in other states and is interested in expanding its consumption.

How do the biogas investments fit in with Urca's LNG investments?

I believe that LNG is the future of biomethane. We expect to begin producing bio-LNG shortly. Industrial clients want to consume biomethane, not just purchase carbon credits, so we need to distribute biomethane to these clients. Bio-LNG makes it possible for us to distribute the product to clients up to 1,000km from our plant. We expect to produce bio-LNG at our Nova Iguacu plant.

How does Urca view the new regulations for biogas currently being discussed in the congress?

We believe that any initiatives that make biogas investments more secure from a regulatory and legal perspective are positive. We depend on financing and regulations that help improve the business environment for the sector are welcome. There is still limited financing available and we hope to eventually tap into new green financing mechanisms.

Is Urca considering investments in green hydrogen from biomethane?

We are very focused on getting our current projects operational, but see hydrogen as the future. It is still not economically viable. This was once the case for biogas, but now it is a viable product, so we believe green hydrogen will eventually be viable.

The new technologies are here to stay and will improve with time, but right now, we still see green hydrogen as a product that is in its early stages.

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