<article><p class="lead">The new Brazilian gas market and state-run Petrobras' divestment process are helping the state of Alagoas in its strategy to increase oil and gas production and lure industries interested in less-expensive gas.</p><p>Alagoas also seeks to expand its gas distribution grid, aiming for residential gas consumption to displace LPG service in vessels, Alagoas economy secretary George Santoro told <i>Argus</i>. This would help local distribution company Algas maintain revenue as large industrial gas consumers shift to bilateral gas supply agreements. </p><p>Alagoas is updating state laws to address the gas distribution business under the open markets, which Santoro expects to be fully approved by June. The state is also empowering its local regulatory agency to better deal with gas issues, which includes hiring more workers. </p><p>There are other challenges the Brazilian gas market changes bring for the states Santoro said, including the high transportation tariffs for Northeastern states and the need for a tool to measure gas movement volumes from one state to another, which will be key for collecting state taxes. </p><p>Alagoas, located in the northeastern coastal region, was one of the first states in Brazil with active oil production in the 1970's but it saw a decrease in investments after Petrobras drove its focus to offshore and pre-salt areas in other states. Now, the new gas market and Petrobras' divestment program has set the stage for more oil and gas investments, including gas production by integrated producer Origem Energia and attracted ExxonMobil to start oil and gas exploration.</p><p>"Prior to oil and gas investment returning to Alagoas, our port of Maceió was mainly used for sugar exports and petchem imports," Santoro said. "And now we are seeing ExxonMobil installing infrastructure to start exploration this year."</p><p>He lauded the new tax revenue coming from the restarted Origem gas production, and the prospects of revenue from ExxonMobil's exploration projects, which may take up to five years to start commercially.</p><p>"Alagoas used to be a gas exporter to other states," he said. "When Petrobras decreased gas production here, we had to start importing to serve existing petrochemical companies. But now, with the Origem production, Alagoas is self-sufficient in gas, in just two months of production." </p><p>In five years, Alagoas projects 3mn m³/d in production from its onshore gas fields, bringing it back to its 1970s production levels. Santoro believes the region will soon build a new gas processing facility to add capacity to the Pilar unit since it will not be able to handle the growing production. </p><p>With more gas, the state is also welcoming gas-fired thermal generation. Seven new power plants have already received environmental permits to participate at the November federal power auction, which may add around 800MW of thermal capacity to the Brazilian interconnected grid. </p><p>"Our state does not have wind and solar power, so natural gas is our bet for the energy transition," said Santoro. </p><p>Alagoas is also expanding its biomethane and biogas production. The state has one biomethane production plant at a landfill that is used to generate power onsite, and is studying other possibilities of biogas generation at 13 sugarcane mills. </p><p class="bylines">By Flávia Pierry</p></article>
