Brazil gas market suffers from slow investments
Brazil will need to accelerate investments in natural gas infrastructure to meet anticipated demand in the next decade, as its southern cone neighbors face their own delays.
With the announced delay of operations on the third pre-salt gas outflow pipeline Rota 3, Brazilian gas consumers say the country needs a larger gas supply, according to a recent study and discussions with market participants, with no chance of additional supply from Bolivia or Argentina imminent.
The pace of investment in Brazil's infrastructure has slowed and is unable to compensate even for natural economic demand growth, according to a study from consulting firm Inter.B. Brazilian investment in infrastructure expected for 2022 accounts for 1.71pc of the GDP, while investments required to bring infrastructure up to par with growth expectations would require at least 3.64pc of GDP annually.
Brazilian energy research bureau (EPE) estimates that Brazil will need significant investments to expand its offshore gas supply, which is key to increasing the country's overall gas supply and reducing dependency on imported LNG. Building a fourth offshore pipeline would cost around R4.5bn, while other projects for offshore pipelines would range from R2.5bn to R5.2bn. The 11 pipelines planned would add 70mm m³/d of capacity, but would cost R40bn.
Brazilian development bank BNDES has been a key participant in major pipeline expansion projects, spending R19.6bn ($3.7bn) from 1998-2020, with 66pc going to transport pipelines and 31pc to gas distribution.
With less pipeline capacity than needed, offshore gas producers pump almost half of the gas back into wells. Oil and gas regulator ANP said the issue will be addressed through the ongoing updating of resolution 17/2015. ANP told Argus it hopes to require new oil and gas field developments include plans to maximize natural gas production and transportation, but the effort will not apply to existing projects.
Brazil may face difficulties with gas supply, says Alvaro Rios, director at consulting firm Gas Energy Latin America. Neighboring Bolivia has declining production and Argentina is just starting construction of the Nestor Kirchner pipeline to bring gas from the Vaca Muerta field into Buenos Aires — a project that can reduce Argentinian dependence on Bolivian gas, leaving more of it for Brazil.
But gas imports from Argentina are also far from a reality. Brazil lacks a crucial pipeline to allow Argentinian gas to reach the country's main consumption centers. Pipeline operator TBG is authorized to build the 594km Uruguaiana-Triunfo line, which would connect Argentina to an existing pipeline in the state of Rio Grande do Sul, but the project will cost R.46bn, according to EPE.
A lack of additional pipeline capacity in Brazil can also hinder plans to purchase more Bolivian gas without Petrobras' participation. On the 30mm m³/d Bolivia-Brazil pipeline operated by TBG, only 10mn m³/d of firm capacity is available as Petrobras holds the remaining 20mn m³/d. Efforts by Mercosul's member countries to integrate infrastructure in the energy sector have decreased in the past 10 years, in a process intensified by the Covid-19 pandemic, said Sidney Ferreira Leite, international relations coordinator at IBS Americas business school.
"Mercosul's 2021 main projects were focused on building railroads for cargo and people. The idea to seek integration of economic policies has weakened," Leite said.
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Australia’s Gorgon LNG train to be out for five weeks
Australia’s Gorgon LNG train to be out for five weeks
Singapore, 7 May (Argus) — One of three trains at Australia's 15.6mn t/yr Gorgon export terminal will be off line for five weeks, operator Chevron told Argus on 7 May. The train has been off line since 30 April because of a mechanical fault in a turbine. Chevron's five-week shutdown expectation is slightly longer than the initially expected shutdown period of about 2-3 weeks, traders said. Each week of downtime on one train at Gorgon reduces the terminal's available liquefaction capacity by about 100,000t. The five-week shutdown is likely to reduce the terminal's production by about 5-8 cargoes, traders said. One standard-sized cargo is roughly equivalent to 60,000-70,000t of LNG. But overarching sentiment from market participants is that the impact on both prices and supply will be limited, as only one train is affected and there are ample cargoes for June and July. There will be a temporary spike in prices as affected buyers — if any — will have to secure prompt cargoes to replace lost LNG from Gorgon, keeping prices supported well above $10/mn Btu, traders said. The shutdown will have a greater impact on prices if repair works drag on for longer and affect summer deliveries, they added. The ANEA price, the Argus assessment for spot LNG deliveries to northeast Asia, for the first and second half June were assessed at $10.57/mn Btu and $10.58/mn Btu on 7 May, higher by 40¢/mn Btu from the previous day. First- and second-half July ANEA prices were assessed at $10.64/mn Btu and $10.66/mn Btu, up by 36¢/mn Btu/mn Btu from a day earlier. Chevron has rescheduled deliveries of some LNG cargoes for their Asian offtakers, according to some traders. Further details are unclear. Shell might have bought around 3-4 cargoes because of the shutdown at Gorgon, according to traders. It is not clear whether the cargoes are for June or July delivery. Some traders have offered both June- and July-delivery cargoes to Chevron but the firm has responded by saying that the shortfall can be managed by optimising its own portfolio, traders said. The Gorgon LNG joint venture is operated by Chevron with a 47pc stake, while ExxonMobil and Shell hold 25pc each. By Simone Tam Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
US majors widen output gap over European rivals
US majors widen output gap over European rivals
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Brazil hydroelectric dam bursts under record rains
Brazil hydroelectric dam bursts under record rains
Sao Paulo, 3 May (Argus) — Brazilian power generation company Companhia Energetica Rio das Antas (Ceran) found a partial rupture in its 100MW 14 de Julho hydroelectric plant following record precipitation in Rio Grande do Sul state. Flooding from the record rains has left 37 dead and forced more than 23,000 people out of their homes, causing widespread damage across the state, including washed out bridges and roads across several cities. Ceran reported that the dam of the hydroelectric plant on the Antas River suffered a rupture under the heavy rains and the company implemented an emergency evacuation plan on 1 May. Ceran's 130MW Monte Claro and 130MW Castro Alves plants are under intense monitoring, the company said in a statement. Rio Grande do Sul state governor Eduardo Leite declared a state of emergency and the federal government promised to release funding for emergency disaster relief. Leite said the flooding will likely go down as the worst environmental disaster in the state's history. Brazil's southernmost state along the border with Argentina has been punished by record precipitation over the past year owing to the effects of the strong El Nino weather phenomenon, according to Rio Grande do Sul-based weather forecaster MetSul Meteorologia. Brazilian power company CPFL Energia controls Ceran with a 65pc equity stake. Energy company CEEE-GT, which is owned by steel manufacturer CSN, owns another 30pc, and Norway's Statkraft owns the remaining 5pc. The state had declared a state of emergency as recently as September 2023 because of unusually heavy rains that resulted in the death of more than 30 people. Weather forecasters expect El Nino conditions to abate in the coming months over the eastern Pacific. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Chevron’s oily DJ basin buy boosts gas output
Chevron’s oily DJ basin buy boosts gas output
New York, 3 May (Argus) — Chevron's US natural gas production has surged in recent quarters due to its crude-focused acquisition of Denver-based PDC Energy last August, increasing the oil major's exposure to the US gas market months after that market entered an extended price slump. Chevron's US gas production in the first quarter was 2.7 Bcf/d (76mn m3/d), up by 53pc from the year-earlier quarter and the highest since at least 2021, according to company production data. Chevron's total US output rose by 35pc year-over-year to 1.57 b/d of oil equivalent (boe/d), while US crude output increased by 21pc to 779,000 b/d. The acreage Chevron picked up last year in the DJ basin of northeast Colorado and southeast Wyoming has higher gas-oil ratios than the rest of its US portfolio. Chevron mostly focuses US production in the crude-rich Permian basin of west Texas and southeast New Mexico. Since Chevron closed its acquisition of PDC on 7 August, US gas prices have mostly languished in loss-making territory. Prompt-month Nymex gas settlements at the US benchmark Henry Hub from 7 August 2023 to 2 May 2024 averaged $2.46/mmBtu, down from an average of $4.999/mmBtu in the year-earlier period. In a May 2023 conference call over Chevron's acquisition of PDC, chief executive Mike Wirth expressed optimism for the long-run outlook for natural gas, despite the more immediately dim outlook. "There's going to be stronger global demand for gas growth than there will be for oil over the next decade and beyond as the world looks to decarbonize," Wirth said. Despite lower US gas prices, Chevron has captured $600mn in cost savings from the PDC acquisition between capital and operational expenditures, the company told Argus . Crude prices have also been more resilient. Chevron's profit in the first quarter was $5.5bn, down from $6.6bn in the year-earlier quarter, partly due to lower gas prices. US gas prices have been lower this year as unseasonably warm winter weather and resilient production have created an oversupplied US gas market. A government report Thursday showed US gas inventories up by 35pc from the five-year average. By Julian Hast Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
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