Natural gas supply in Sao Paulo state's countryside is still lagging demand, leaving industries with little opportunity to migrate to the liberalized market.
A number of companies present at a power industry event in Limeira, Sao Paulo state, last week said there is nowhere near enough gas supply available, with migrations to the liberalized gas market only possible starting in 2025.
Energy traders are eyeing opportunities like those offered by gas grid-disconnected companies, such as small-scale LNG or compressed gas and biomethane supplies. This includes Brazilian power trader Migratio's partnership with natural gas logistics company GNLink to bring biomethane to consumers in Brazil's countryside.
Structuring projects from distribution companies can help clear those demand hindrances, said Eliesio Silva, Sao Paulo state gas regulator Arsesp's trading, local network, project and development manager. These projects bring natural gas to places without pipelines through trucks and inject the gas into local distribution networks to comply with regulatory and infrastructure limitations that still prevent consumers from buying directly from producers.
The lack of available supply to fulfill market demand is a common concern among natural gas consumers in Brazil. High reinjection levels at the site of production are usually the first reason cited for shortages, but a lack of clear regulations for nationwide pipeline and processing infrastructure and for each Brazilian state holds back demand. ANP expects nine regulatory frameworks on its agenda to be completed in 2025, including gas release terms, the interconnection between pipelines and the expansion of gas transportation capacity.
Market participants also expect new supply to be brought into the market starting by the end of 2024 with the completion of the 355km (220 mile) Rota 3 offshore pipeline. In the following years, state-controlled Petrobras will start production on two floating, production, storage and offloading (FPSO) units in the Sergipe-Alagoas basin with capacity to produce 18mn m³/d of natural gas each. There is also 16mn m³/d in additional production capacity from Norway-based Equinor's pre-salt BM-C-33 block, to become available in 2028.
Migratio ventures into new markets
Migratio said at the Limeira event this week it will partner with Phama Energias Renovaveis and Torao Participações to start producing green ammonia derived from green hydrogen.
The company has three plants, each producing 300,000 m³/yr of green ammonia: one in northern Tocantins state — which uses power from a rice husk thermal plant to produce hydrogen — and two in Rio Grande do Sul state, using power from small hydroelectric plants. It plans to expand those operations, reaching 10 plants in the next five years.
Almost 70pc of production costs to make the green hydrogen come from power generation, as it is an electricity-intensive process, according to Migratio's founder and director Fabio Saldanha. The company is also studying using the green ammonia to produce other green fertilizers.
With the opening of the high-voltage power market next year, the company is also seeking new clients who will be allowed to sign bilateral contracts. During the event, local industry representatives had a chance to ask questions and gain a better understanding of what the liberalization of the power market will mean to them.
Next year's power market opening will be the first time medium-sized industries are able to make decisions regarding their power supply. Many trading companies agree that the most important step in this transition is that these prospective clients become fully aware of their options.
