Brazil lower house approves gas law

Brazil's lower house of congress approved legislation that will advance the opening up of the country's natural gas sector to increase competition.

The bill, which still needs to be approved by the senate, is part of a broader movement to reduce the role of state-controlled oil company Petrobras in a sector it has dominated for decades.

The law promotes further unbundling the sector by prohibiting gas producers and resellers from owning gas transport infrastructure.

It also converts the concession model for the construction of new gas pipelines into an authorization model, which will reduce bureaucracy, facilitating construction of new infrastructure.

The bill also facilitates third-party access to gas pipelines, gas treatment facilities and LNG regasification terminals and establishes an entry-exit tariff model, which offers greater flexibility for network users.

The bill was approved by a wide, 224-to-85 margin, and received strong support from both the industrial and agribusiness sectors.

Brazil's powerful industrial lobby (CNI) said that it is "essential that the senate analyse and vote on the bill quickly in order to modernize the gas sector, which is fundamental for the recovery of industry and the overall economy."

Investments in the sector are projected to reach R60bn ($11.15bn) over the next five years if the legislation is passed.

For congressman Laercio Oliveira, who was the chairman of the committee in charge of the bill in the lower house, the legislation will help reduce gas prices and will increase investment in infrastructure.

"Brazil has not built a single kilometre of gas pipeline" since a 2009 bill that xxxx was passed, he said. "We are way behind."

For Brazil's natural gas distributors' association Abegas, the law will not result in significant changes in the market. Abegas argued that the bill needs to require investments in thermoelectric plants that will operate year round, creating firm demand, which will guarantee investment.