Brazil gas distributors flooded with supply offers

Natural gas distributors in Brazil's south-central region received over 130 supply proposals from 13 companies, underscoring the country's evolving market dynamics.

Five distributors — 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 a total of 3.5mn m3/d for 2022 and 2023 and up to 6mn m3/d starting in 2024 to substitute contracts with state-controlled Petrobras.

The supply offers include domestic gas, LNG, imported pipeline gas as well as biomethane. Each distributor will now begin negotiations with the potential suppliers, which include Petrobras as well as newcomers such as US LNG company New Fortress Energy.

The significant turnout grew out of the opening of Brazil's gas market, long dominated by Petrobras. While a competitive gas law is now on the books, regulations are still in progress, including the key issue of third-party pipeline access.

Transportadora Brasileira Gasoduto Bolivia-Brasil (TBG), which operates the Brazilian side of the Gasbol line from Bolivia, continues to offer flexible daily, weekly and quarterly transport contracts, which has been an important step towards opening of pipeline infrastructure. Petrobras is currently in the process of selling its 51pc stake in TBG, part of its divestment from the gas sector.

In a previous tender, which took place in 2019, the same group of distributors received 50 proposals, but Petrobras was the only company that signed supply agreements because of a lack of regulatory clarity on pipeline access.

Still, Petrobras is expected to make a strong showing in the new tender, after it recently adopted the more competitive US benchmark Henry Hub as an optional index for its wholesale natural gas contracts, displacing Brent crude.

New Fortress is positioned to supply the region through its Santa Catarina regasification project due to start by mid-2022. The project will connect to Gasbol, allowing it to supply gas to both distributors and power generation projects across southern and central Brazil.