A diverse group of Brazilian industries that use or move natural gas have asked the new energy minister to consider cutting prices for them and expanding pipeline investments.
The group — which includes the chemistry and fertilizer industries, gas distributors and engineering firms — suggests different federal government-defined tax rates for gas depending on its usage. This would lead to subsidies for gas used as a raw material for chemical consumption and higher final prices for gas used to generate power or for heating purposes.
The companies, dubbed the coalition for the competitiveness of natural gas as a raw material, brought the proposal to the new mines and energy (MME) minister Alexandre Silveira last week.
Gas producers, pipeline companies and large industrial consumers frowned upon its proposals.
"It is legitimate that distributors, contractors, engineering companies and the chemical industry express their demands to the government," said Rogerio Manso, president of the Brazilian gas transportation companies association (Atgas). "But this cannot be confused with the productive natural gas chain, which includes gas producers, pipeline companies and large gas consumers."
Anabal Santos, executive-secretary at the Brazilian independent oil and gas producers association (Abpip), said that all links in the gas supply chain should be included to discuss improvements in gas competitiveness. Therefore, "its of utmost importance that the gas can be traded in the free market."
The group is also suggesting that gas reinjections — when gas is pumped back into wells to repressure them and maintain oil production rates — be limited to 20pc of total production. Today, almost 50pc of the Brazilian gas production is reinjected. To curtail reinjection rates Brazil would need to attract investments in outflow pipelines from offshore gas fields, new gas processing units, new fertilizer factories and distribution pipelines.
The origin of these investments — that is, if they would be private or state-backed and whether taxpayers or gas consumers would pay for them — is not clear. The new group asks for "the harmonic and integrated engagement of state-conducted entities" such as the mines and energy ministry, state-controlled Petrobras, energy research bureau EPE, state-owned oil and gas marketing firm PPSA, hydrocarbons regulator ANP and utilities company Eletrobras — which was privatized in 2022.
Some suggestions depend on changing laws and stem from a bill drafted by senator Laercio Oliveira. Other benefits for fertilizer producers would be included over time, according to the group's plans.
The proposal also calls for some projects to be prioritized, such as two new fertilizer units in Minas Gerais — Silveira's home state — and the Brasil-Central pipeline in the heartland. Pipeline company TGBC, which owns the rights to install the infrastructure, is a member of the coalition and was a part of the controversial Eletrobras privatization bill.
Participants of the coalition believe "they scored" by being able to present their propositions to Silveira in person, one coalition member told Argus. But gas market participants worry the proposals will hinder their direct communication with MME.
"These are associations with their own interests, for particular companies and projects, that clearly have political power," a person from the oil and gas production industry told Argus.
"Choosing favorite groups to hear when planning policy always leads to unbalances or corruption," a representative of large gas consumers said. A second representative said the project would fix prices "to favor some groups."
Academic research on the coalition's proposals will be presented to Silveira, who promised to open a channel at Petrobras for the group to discuss the propositions, one source in the meeting told Argus.
