Brazil to clear gas law, distributors await supply

Brazil's congress is expected to give final approval today to long-awaited legislation that will allow third-party access to natural gas pipelines, gas treatment facilities and regasification terminals long dominated by state-controlled Petrobras.

The senate approved the bill last December but included an amendment that maintains project rights for companies that obtained gas pipeline concessions, but had not moved ahead with construction. In its vote later today, the lower house is expected to overturn this change and maintain the original text it approved in September, according to the rapporteur of the bill in the lower house, Sergipe state congressman Laercio Oliveira.

The legislation is seen as an important step towards the opening of Brazil's gas market as Petrobras unwinds its traditional monopoly.

President Jair Bolsonaro is expected to sign the bill into law.

The bill's progress comes as five gas distributors in south-central Brazil kick off their second joint supply tender. Compagas (Parana state), MSGas (Mato Grosso do Sul state), SCGas (Santa Catarina state), Sulgas (Rio Grande do Sul state) and GasBrasiliano (Sao Paulo state) are seeking 3.5mn m3/d for 2022 and 2023 and up to 6mn m3/d starting in 2024.

This is the second joint tender conducted by the five distributors, but because of a lack of clear regulations for pipeline access, Petrobras swept the previous offer.

Distributors are now receiving some positive signals from potential suppliers. "In the last tender offer, we received some proposals for supply in 2023-25, but ultimately, Petrobras was the only one that could deliver gas in 2021. The Pernambuco contract with Shell is an excellent indicator that companies other than Petrobras will be able to deliver," Sulgas president Carlos Camargo de Colon told Argus, referring to Pernambuco state distributor Copergas' landmark gas supply contract signed with Shell late last year. The contract is the first major deal signed between a domestic gas producer other than Petrobras and a local gas distribution.

Southern Brazil currently faces supply constraints because of limited availability of Bolivian gas. Supply to Sulgas is limited to 2.7-2.8mn m3/d.

"Sulgas consumes every molecule of gas that is delivered to the state and sometimes we are forced to ask our clients to consume less, because there is not enough supply," Colon said.

Some progress has been made towards granting third-party pipeline access. Last month, Brazil's hydrocarbons regulator ANP launched a second open season for capacity on the 2,593km (1,610mi) Bolivia-Brasil pipeline (Gasbol) in 2021-25 after modifying the terms to attract more participants. The line serves all five distributors participating in the tender.