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Brazil expands tax cuts to nat gas projects

  • Spanish Market: Natural gas
  • 18/08/21

The Brazilian federal government will include the natural gas sector in an existing tax incentive program for infrastructure investments, a move that could boost the country's burgeoning gas markets.

The new ordinance will let natural gas production, processing, pipelines and local distribution system projects waive up to 9.25pc in federal taxes on machinery or feedstock under the existing Special Regime to Incentivize Infrastructure Investments (REIDI). REIDI was created in 2007 for transportation, power, ports, energy, irrigation and sanitation sectors, to eliminate the PIS and Cofins taxes which generate funds for social programs.

Companies can mandate gas structure projects get the PIS/Cofins tax breaks, which are then deducted from the machinery and feedstock purchase invoices. These taxes will be later zeroed-out when the equipment, feedstocks or other products are used by the project.

The update to the REIDI to include natural gas projects is aimed at "giving more legal certainty to entrepreneurs" and help "increase the investment in the gas sector", the Ministry of Mines and Energy told Argus.

At least one natural gas pipeline construction project applied for the tax break in the past, but it was not clearly defined by law. The inclusion of the natural gas sector, particularly the possibility of including non-oil associated gas production infrastructure in the tax break, is one more signal from the government that it will open the gas sector and attract infrastructure investments. The biofuels sector has asked for the same benefit but has not yet been granted.

Including natural gas in the REIDI tax break may encourage more domestic natural gas production, said Renata Beckert Isfer, partner at oil and gas exploration company Petres Energy.

"Brazil's overly demanding regulatory framework and its high royalty payments for onshore E&P companies make the production of natural gas economically unfeasible in areas that could be producing and generating more jobs and income," Isfer said.

It can also speed up the expansion of market capacity and reduce the cost of projects, said Márcio Seixas, an energy sector tax advisory attorney at the law firm Terciotti, Andrade, Gomes, Donato.

The newly opening gas market in Brazil will depend on deep levels of investment to gain liquidity. Tax breaks for construction of new infrastructure can accelerate the expansion of the 9,409km pipeline network and add more gas processing capacity to the 14 existing units, with 96mn m³/d processing capacity.

Seixas said gas businesses are still hoping for even deeper tax cuts, like the oil industry gets under the REPETRO law, where production, import and sales taxes can also be trimmed.


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11/12/24

US inflation rises to 2.7pc in November

US inflation rises to 2.7pc in November

Houston, 11 December (Argus) — Headline US inflation ticked higher in November, largely on food and shelter costs, suggesting the Federal Reserve still has work to do to reach its inflation target. The consumer price index rose by an annual 2.7pc in November after rising by 2.6pc through October, the Labor Department said. The gain matched expectations in a survey of economists by Trading Economics. So-called core inflation, which strips out more volatile food and energy, rose by 3.3pc, matching the prior month's gains. Services less energy services rose by 4.6pc following a 4.8pc increase the prior period. Today's report is the last consumer price index (CPI) reading before Federal Reserve policymakers meet next week to assess progress in bringing down inflation to their 2pc long term goal and release economic projections. The CME FedWatch tool today gave a 96pc probability the Federal Reserve will cut its target rate by a quarter point at its last meeting of the year, up from nearly 89pc Tuesday. The Fed began cutting its target rate in September after holding it at a 23-year high for more than a year. The energy index contracted by 3.2pc for the 12 months ending in November after falling by 4.9pc through October. Gasoline fell by 8.1pc and the fuel oil index declined by 19.5pc. The food index rose by 2.4pc over the past year, following a 2.1pc gain through the prior month. Transportation services rose by 7.1pc. Shelter slowed to 4.7pc from 4.9pc The CPI rose by 0.3 in November from the prior month, after rising by 0.2pc in each of the prior four months. The shelter index rose by 0.3pc for the month, accounting for nearly 40pc of the total monthly gain in the headline index, Labor said. By Bob Willis Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Brazil's inflation accelerates to near 5pc in November


10/12/24
10/12/24

Brazil's inflation accelerates to near 5pc in November

Sao Paulo, 10 December (Argus) — Brazil's headline inflation accelerated to a 14-month high in November, led by gains in food and transportation, according to government statistics agency IBGE. The consumer price index (CPI) rose to an annual 4.87pc in November from 4.76pc in the previous month, IBGE said. Food and beverage costs rose by an annual 7.63pc in November, accounting for much of the monthly increase, following a 6.65pc annual gain in October. Beef costs increased by an annual 15.43pc in November following an 8.33pc annual gain for the prior month. Higher beef costs in the domestic market are related to the Brazilian real's depreciation to the US dollar, with the exchange rate falling to a record-low R6.11/$1 at the end of November. The stronger dollar leads producers to prefer exports over domestic sales. Beef prices rose by 8pc for the month alone. Soybean oil prices rose by 27.75pc over the year. Transportation costs, another major contributor to the monthly acceleration, rose by an annual 3.11pc in November after a 2.48pc gain in October. On a monthly basis, transportation costs rose by 0.89pc in November, reversing a contraction of 0.38pc in October. Housing costs rose by 4pc over the 12-month period. Brazil's central bank last month hiked its target rate to 11.25pc, its second increase off a low of 10.5pc between May and September, to try to head off a resurgence in inflation. It was at a cyclical peak of 13.75pc from August 2022 through July 2023 as it sought to tamp down the post-Covid-19 surge in inflation. Fuel prices rose by an annual 8.78pc in November after a 7.22pc gain in October. Motor fuel costs fell by 0.15pc in November compared with a 0.17pc drop in October — thanks to lower ethanol and gasoline prices. Diesel prices contracted by 2.25pc in the 12-month period. Power costs slowed to an annual 3.46pc in November following a 11.58pc gain in October. Electricity prices contracted by a monthly 6.27pc after a decrease in power tariffs on 1 November. Monthly inflation slowed to 0.39pc in November from 0.56pc in October. The central bank's inflation goal for 2024 is 3pc, with a margin of 1.5pc above or below. By Maria Frazatto and Lucas Parolin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Meta sites largest data center in Louisiana


10/12/24
10/12/24

Meta sites largest data center in Louisiana

New York, 10 December (Argus) — Facebook-parent Meta will build its largest data center ever in northeast Louisiana, near one of the largest US natural gas fields. Meta plans to invest more than $10bn in the Richland Parish data center, which will "play a vital role" in advancing Meta's ambitions in artificial intelligence software, the company said. Construction of the facility is expected to continue through 2030, Meta said. Richland Parish is "an outstanding location" for Meta to build a data center because of its "access to infrastructure", "reliable grid" and "business-friendly climate", the company said. Meta's siting decision also was driven in part by "the availability of reliable, low-cost energy", according to Grow NELA, the economic development agency of northeast Louisiana. The parish is close to the prolific Haynesville shale of east Texas and northern Louisiana, which last year accounted for about 14pc of US dry gas production, according to US Energy Information Administration data. Securing gas supplies in a major gas-producing state like Louisiana may be easier because of the simpler regulatory process behind the construction of intrastate gas pipelines. Gas pipeline construction across US state lines requires the involvement of federal energy regulators, resulting in longer and more uncertain construction timelines. Meta said it will partner with US gas and power utility Entergy to add "enough clean and renewable energy to the grid to cover 100pc of the electricity use" of the Richland Parish data center, with Entergy adding "clean, efficient power plants to its system" to meet power demand. Meta and Entergy have looked at "options to invest in multiple clean energy options, including nuclear energy," Meta said in a statement to Argus . But it did not respond to an inquiry asking if it had secured supply deals for the facility with electricity generated by any particular fuel source, such as nuclear, gas or coal. Amazon, Google and Microsoft in recent months have said they expect to fuel their own planned data centers with nuclear energy , which could provide baseload, low-emission electricity to the new facilities. But long timelines and large upfront costs for conventional nuclear power plants, alongside the uncertain emergent technology behind nuclear small modular reactors, or SMRs, present obstacles to nuclear-powered data center development. For those reasons, the surge in expected US electricity demand through the end of the decade to fuel new planned data centers could, in the short term, translate largely into increased gas demand, Alan Armstrong, chief executive of Williams, the largest US gas pipeline company, told Argus earlier this month. Data center operators "are in such a hurry, they are just wanting the power", Armstrong said. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Norway to end new international fossil fuel financing


10/12/24
10/12/24

Norway to end new international fossil fuel financing

London, 10 December (Argus) — Norway will from January no longer provide public finance for new unabated international fossil fuel projects, in line with a commitment it made in December last year. Norway's export credit agency, Eksfin, provides most of the country's financing for overseas fossil fuel projects. Eksfin provided between 8.78bn Norwegian kroner and 10.98bn NKr ($786mn- 983mn) over July 2021-June 2023 for fossil fuel projects, civil society organisation Oil Change International found. Norway signed the Clean Energy Transition Partnership (CETP) at the UN Cop 28 climate summit in 2023. The CETP aims to shift international public finance "from the unabated fossil fuel energy sector to the clean energy transition". The CETP, which now has 41 signatories, was launched at Cop 26 in 2021, with an initial 39 signatories including most G7 nations and several development banks. Signatories commit to ending new direct public support for overseas unabated fossil fuel projects within a year of joining. Abatement, under the CETP, refers to "a high level of emissions reductions" through operational carbon capture technology or "other effective technologies". It does not count offsets or credits. Australia, which also signed the CETP at Cop 28, said last week that it would no longer finance overseas fossil fuel projects. "Norway is also working to introduce common regulations for financing fossil energy within the international main agreement for state export financing in the OECD", the Norwegian government said today. Norway's policy "helps increase momentum" for an OECD deal that could end $41bn/yr in oil and gas export financing, Oil Change said. Countries are involved in "final negotiations" on the deal today, Oil Change added. By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

ExxonMobil to accelerate PNG’s P'nyang gas development


10/12/24
10/12/24

ExxonMobil to accelerate PNG’s P'nyang gas development

Sydney, 10 December (Argus) — ExxonMobil plans to expedite the next stage of its 4.4 trillion ft³ (125bn m³) P'nyang gas field in Papua New Guinea (PNG), which is considered critical to the future of the nation's two major LNG projects. Exxon, the operator of the 6.9mn t/yr PNG LNG joint venture, will bring pre-engineering works forward to April-June 2025 by accelerating the concept select phase that is presently underway. This would bring it forward "years sooner than previously envisaged," said ExxonMobil PNG's senior vice-president of commercial development, Johanna Boothey, at the PNG Resources and Energy Investment Conference in Sydney, Australia on 10 December "We expect to undertake initial ground surveys and to establish a project office in Western Province in the coming weeks," she added. PNG's government in March signed a fiscal stability agreement for the P'nyang project with PNG LNG partners. A final investment decision (FID) for the P'nyang field is targeted for 2029, following the start-up of the planned 5.6mn t/yr Papua LNG export terminal, with synchronisation between the two projects seen as guiding the investment timeline. But further delays to the Papua LNG project could cause feedstock shortages at PNG LNG, as the former project is expected to provide 2mn t/yr worth of gas to the latter. Continuing concerns about Papua LNG's FID slipping further may prompt Exxon to further advance P'nyang's development timeline. ExxonMobil holds 49pc of P'nyang, Australian independent Santos controls 38.5pc while Japanese upstream firm JX Nippon has a 12.5pc stake. By Tom Major Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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