Brazil gas reinjections rise despite thermal demand

Brazil's natural gas reinjections — where gas is pumped back into wells to enhance oil recovery, avoid flaring or because of a lack of pipeline takeaway capacity — have risen steadily since September 2018, even amid increased demand for gas-fired power generation.

Natural gas reinjections have only decreased twice on a year-over-year basis: in December 2020 and October 2021, when levels fell by 2.5pc and 1.3pc, respectively. In December 2020, Brazil faced the height of the Covid-19 pandemic while entering a drought that hindered its hydropower generation and boosted thermal power for almost a year. October 2021 marked the height of the country's thermal generation usage, with an average 10,000MW coming from gas plants.

Some consumers argue that reinjections take away gas that could lower prices, supply thermal power generation thus trimming coal-fired and fuel oil-fired units, and cut LNG imports. Producers say they cannot reduce reinjection rates because of technical needs and commitments.

Natural gas reinjections hit their lowest levelsince 2021 — when overall natural gas production grew to levels similar to what we see today — in October 2021, at 57.3mn m³/d. But that still represents 44pc of the total volume of gas produced in Brazil that month.

From January 2021 to February 2023, about 48pc of the natural gas produced each month was reinjected.

Although production has grown over time, the percentage of produced natural gas reinjected has also increased. In January 2018, 27pc of the 111.6mn m³/d Brazil produced was reinjected back into wells. In February 2023, 53pc of the 143.5mn m³/d of gas produced was reinjected. That 77.2mn m³/d in February was the third reinjection record since August. At the same time, gas-fired generation was measured at an average of 1,643MW in February 2023, one of the lowest demand rates for gas-fired power since 2021.

The growth in the percentage of produced gas reinjected can be attributed to many factors, such as increased exploration of pre-salt fields with high CO2 levels — which increases the technical need for reinjection. A lack of transportation capacity from offshore gas fields also hinders an increase in supply, even though some consumers argue there is enough demand.

Reducing reinjections at operating pre-salt fields is not possible, Sylvie D'Apote, executive natural gas director at Brazil's oil industry association IBP, said during a Sao Paulo state natural gas event last week.

Oil companies sign commercial commitments stating how much oil and natural gas they will produce from a well when they first receive authorizations from the government. Those numbers take into account certain levels of reinjection that cannot be altered before the ends of the contracts.

Brazil reinjected 70mn m³/d in 2022, according to IBP. Of the total, 40pc was reinjected because of high CO2 levels, another 40pc to increase oil production and 10pc was reinjected in the isolated fields of Manaus, in Amazonas state — where natural gas is primarily used for regional thermal generation because transportation is a challenge. Only the remaining 10pc was reinjected because of a lack of infrastructure, because of the delay in construction of the Rota 3 pipeline, according to IBP.

By Rebecca Gompertz