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Gas set for prominent role in Lula's 4th term

Gas set for prominent role in Lula's 4th term

Sao Paulo, 26 October (Argus) — Luiz Inacio Lula da Silva's victory in Brazil's presidential election is likely to keep natural gas high on the country's energy agenda, despite the issue being largely absent from discussions during the campaign. Candidates for the presidency said almost nothing in recent months about gas' role in energy security or its potential contribution to future energy transition commitments, as Brazil seeks an increasingly sustainable and lower-carbon energy mix. But recent public policy in the sector and Lula's government platform offer some clues about the likely path over the next four years. Many market participants see gas as already playing a prominent role in Brazil's energy agenda, even though significant challenges remain. Lula's third presidential term advanced several important regulatory discussions in the gas market , including new transportation tariffs charged by pipeline operators , third-party access to gas processing, gathering and LNG import infrastructure , and even gas release measures aimed at increasing market competition and encouraging more competitive prices. Many, however, remain under discussion, with no final decisions yet taken, pointing to part of the agenda taking shape through 2030. In the week leading up to the second round of voting , state-owned trading firm PPSA also held the first auction of gas belonging to the federal government under pre-salt contracts . The move pointed to further efforts to open up the market and lower prices for end-users, which responded with stronger appetite for the fuel. The company has signaled plans for another auction in 2027 , 50pc larger than the first, involving deliveries of 1.8mn m³/d. Other developments also underscore the importance being given to gas in this new cycle, including the capacity reserve auction held in March, which secured almost 19GW of contracted capacity, around 15GW of it from natural gas- and biomethane-fired power plants. Tax incentives recently approved for data centers may also incentivize a new source of gas demand . Prospects for a significant increase in production over the next 10 years, driven by new discoveries and the start-up of the Sergipe Aguas Profundas (SEAP) and Raia projects, should provide further momentum for gas in Brazil's energy agenda . The volatile geopolitical environment, marked by the Russia-Ukraine conflict and escalating tensions in the Middle East, could further strengthen Brazil's prioritization of gas. External uncertainties have prompted several economies to place renewed emphasis on energy security and seek greater diversification of supply sources to mitigate risks. Brazil is unlikely to be an exception, particularly given prospects for increased domestic gas availability. One potential route toward greater supply diversification involves purchasing larger volumes of Argentinian gas as production from the Vaca Muerta unconventional formation increases. But the extent of the strained relationship between presidents Lula and Javier Milei could hamper a more collaborative agenda. Lula 4 Lula's platform keeps state-controlled Petrobras at the center of Brazil's energy strategy. The incumbent pledges to expand investments in upstream oil and gas, refining and LNG logistics, while maintaining gas and biomethane as key transition fuels to support industrial development and power system reliability. His proposals also call for further expansion of gas transportation and distribution infrastructure, stronger regional gas integration and the reinforcement of local content requirements. "The role of gas and biomethane as complementary sources to renewable energy will continue to be encouraged, enhancing energy security, increasing power system flexibility and strengthening the competitiveness of the Brazilian economy," Lula's platform states. Lula's government platform also outlines R595bn ($118.1bn) in investments in power generation and transmission, oil, gas, fertilizers, shipbuilding and refining as part of the broader infrastructure agenda under the Growth Acceleration Program. "These investments contribute to energy security, reduce external dependence on fuels and fertilizers and help accelerate economic growth, ease inflationary pressures amid a turbulent geopolitical environment and create skilled jobs," the platform says. The platform also calls for reconciling "energy security" with a "just energy transition" alongside efforts to combat poverty. It also highlights a strategy to "increase the share of renewable sources, expand investments in storage and power system flexibility, and accelerate the gradual replacement of fossil fuels with biofuels and low-carbon-intensity fuels." Looking ahead Lula ends his third term with several major gas issues still on the table, including gas release measures, a review of transportation tariffs charged by pipeline operators and third-party access to gas processing and gathering infrastructure. The next administration will face the challenge of making concrete progress on rules that will determine how concentration in the gas marketing sector is reduced and establish metrics for assessing reductions in Petrobras' market share. Petrobras' role in the gas market is set to be one of the main areas of contention during the next administration. Although Lula and his political allies consider the company strategic, suggesting a low likelihood of further asset sales, progress toward greater market opening could maintain tensions within the federal government. Over recent months, Petrobras has stepped up its opposition to policies aimed at further opening the gas market , pointing to risks of legal uncertainty and potential impacts on future investment. The dispute could continue throughout the next four years. Lula will also face significant governing challenges after the election of the most hostile congress of his four presidential terms. Still, market participants say the gas agenda may be somewhat insulated from the turbulence of Brazil's political polarization, as it has increasingly taken on the characteristics of a state policy over the past decade. By Marcos Mortari Send comments and request more information at feedback@argusmedia.com Copyright © 2026. Argus Media group . All rights reserved.