Natural gas volumes on Brazil's wholesale market might grow by 50pc by the end of the year, some market participants said, because companies are feeling more confident about moving to the liberalized market from the regulated one.
Market participants tell Argus they expect gas volumes in the nascent open market to reach 15mn m³/d by year-end, up from the current 10mn m³/d, which equals about 19pc of all volumes on the Brazilian market. The number of free-market contracts signed more than doubled in the first quarter from the same period in 2024, according to hydrocarbons regulator ANP's data, which has generated a wave of interest from potential new joiners and companies that have already made the migration to the free market, sources tell Argus.
The pace of migration to the liberalized market is picking up, but uncertainty over where there are bottlenecks and which solutions will work in unlocking the market persists. This uncertainty continues to be a barrier for new entrants to make informed decisions, according to market sources.
Some companies that have partially migrated to the free market said they have been planning to complete the transition next year and move more of their contracts over.
Brazil's gas market faces key structural challenges, including a lack of information on price differences between the regulated and free markets and a lack of information on transport grid capacity contracts, tariffs and penalties. Many market participants' limited understanding of the full natural gas value chain also hinders efforts to identify bottlenecks, while state-controlled Petrobras' dominant role as a price maker, and processing and pipeline issues continue to restrict competition.
Participants signed 159 gas contracts in the liberalized market in the first quarter — including 21 for industrial supply, equal to about 13pc of wholesale agreements. Swiss food company Nestle earlier this year debuted in the open market, with Portugal's Galp supplying the gas. Other supply agreements this year were signed by mining giant Vale, paper company Suzano, steelmakers Usiminas and CSN, carmaker Volkswagen and chemical firms Cabot and Yara. In contrast, 37 industrial contracts were signed in 2024, representing 9.6pc of the liberalized market.
The liberalized gas market, established by a 2021 federal law and regulated by states, allows large consumers to choose suppliers, negotiate contracts and set supply terms. Distributors are limited to charging for network use. In the last couple of years, states have revamped the regulatory environment to attract new consumers into the open model.
