Brazil gas contracts, transport to shape market

Brazil natural gas market participants discussed the terms of supply contracts and the state of pipeline development at the Argus Brazil Gas Commercialization Forum in Rio de Janeiro.

LNG has a key role as a tool to promote flexibility in Brazil's transition to a free gas market, said Guilherme Veloni, regulation manager at Gas Natural Açú (GNA) — a joint venture among Prumo Logistica, BP, Siemens and SPIC Brasil. LNG provides Brazil with the possibility of prompt gas offers, an attribute that Brazil natural gas lacks, he said.

The market's priority has to be providing energy security, with gas requiring long-term contracts to become the ideal partner for renewable sources in the future, said Gabriela Damasceno, state-controlled Petrobras' general intelligence, market and trading manager.

One of the greatest challenges for the development of the market in Brazil is the "natural stiffness" of supply accompanied by variable demand, said Daniel Elias, chief executive of oil and gas producer Galp.

On the second panel, which focused on midstream challenges, transportation market players discussed the investment needs of the market. Helder Ferraz, commercial and regulation director at gas transport company NTS, said the company could invest 4bn-6bn reals ($780mn-$1.17bn) in Brazil, depending on the creation of a pre-salt corridor, for example.

The role of truck transportation was also discussed. Trucks will be responsible for bringing gas to places where demand does not justify the construction of pipelines, said Walter Vighy, director of LPG logistics specialist firm Contatto.

Panelists also discussed how penalties in contacts play a role in educating the market. Such penalties do not convert into revenue to transportation companies, but ensure the terms of the contracts are respected, said gas transport company TBG's commercial director, Jorge Hijjar, and gas transport company TAG's commercial and regulatory director, Ovídio Quintana.

By Rebecca Gompertz