Brazil's new plan to boost domestic natural gas supply and reduce prices has prompted mixed reactions from market participants, as they balance the potential benefits with concerns over regulatory changes and their impact on operations.
The new rules, signed by the president and energy and mines minister on 26 August, creates a national plan for gas (PNIIGB), and gives energy research company EPE and hydrocarbon regulator ANP a greater role in efforts to increase gas production and lower prices. But how those changes will actually be carried out is still unclear, and raises concerns about government intervention that could disrupt operations, contracts and new investments.
EPE would prepare and carry out the new national gas development plan, while ANP's powers are expanded greatly to ensure price transparency and identify costs of natural gas, its derivatives and biomethane. ANP would also develop a model for transportation tariffs that are uniform for all shippers.
The new rules also open the door for government control of tariffs for third-party access to natural gas transportation and processing infrastructure — mainly controlled by state-controlled Petrobras — which is currently negotiated by the parties. It also opens the possibility of a review of Brazil's natural gas re-injection plans for pre-salt fields. Brazil reinjected 55pc of its July gas production, according to ANP.
The new rules will not immediately go into effect as many still depend on procedures that must be defined by ANP and other agencies. The legality and application of many of these procedures will probably be challenged in the courts, according to Ali Hage, a partner at law firm Veirano Advogados.
Gas consumers and the government have a shared desire for lower gas prices, but making rules that balance supply and price issues could threaten free market operations and instead lead to competitive distortions and regulatory uncertainty sources told Argus.
Reducing gas prices has long been a government priority, with energy minister Alexandre Silveira considering different strategies in recent months, including advocating for shale gas production. He also criticized the cost of accessing essential infrastructure, which was addressed in the new regulation.
The new rules also allow state-owned marketing firm PPSA to contract gas distribution capacity from Petrobras for direct sale. That move alone should change market supply, as well as the gas from the new Rota 3 pipeline, which is expected to start operating in the coming months. More gas supply from Bolivia to private companies and from Argentina should also address that issue.
