Tardy gas line open seasons hurts market

Brazil's failure to establish timelines for natural gas consumers to contract for pipeline capacity has made it difficult for new participants to join the newly-opened market.

Last week, oil and gas regulator ANP announced the open season to contract for firm transportation capacity from 2023-2027 at the TBG pipeline network, serving Mato Grosso do Sul, Sao Paulo, Parana, Santa Catarina and Rio Grande do Sul states. ANP released the rules for the tender on 10 November and gave companies from 11-16 November to declare their interest — a very short time frame for companies to plan years of gas needs. The contracts will be signed from 26-30 December and service will start on 1 January.

A similar move is being planned by TAG, the pipeline company that serves Brazil's northeastern region, but it is not clear when ANP will approve it. The company sent an e-mail to its clients proposing a calendar for its 2023 firm gas transportation contract open season to start on 16 November, but was still awaiting ANP's approval.

Gas carriers can currently only contract for firm gas shipping capacity through open seasons. Other opportunities offered by pipeline companies are for interruptible gas transportation capacity, a method that poses increased risk and has less interest from industrial gas consumers. Pipeline company NTS, which operates in Brazil's southeastern states, has not yet launched a firm capacity open season since the gas market liberalization.

"I have only one week to plan my entire life as a trader next year, otherwise I cannot transport any gas in 2023," a gas trader told Argus.

Although TAG and TBG's open seasons for firm capacity are welcome, gas market participants complain that there is no predictability or a clear plan for gas shippers to prepare for future opportunities to contract for the capacity.

"TBG's open season has been ongoing since 2019, but we failed to define a timeframe," says Adrianno Lorenzon, gas director at Brazilian energy-intensive industries' association Abrace. "This hampers the gas market opening."

ANP must approve all open seasons by transportation companies, because tariffs are regulated and must not surpass the authorized maximum revenue. But that has caused delays, as the regulator's department in charge of natural gas affairs is severely understaffed.

"Our market needs to be able to hire transportation capacity on demand 24/7", a trader told Argus.

Pipeline companies are working to wrap up network standards that will help better coordinate the market. The firms are also working to simplify capacity contracts — an ubiquitous demand from gas shippers — and to harmonize the contracts among the three pipeline companies, pipeline association AtGas president Rogerio Manso said.

TBG's open season allows participants to request capacity for 12-month periods from 2023-2027, demanding meticulous long-term planning from gas market participants. Also, there is little to no capacity available at some of the pipeline network's entry and exit points. Such is the case for a Sao Paulo state exit zone that has only 10,000m³/d of capacity for the open season's five years. Rio Grande do Sul state has zero exit capacity until 2026.

TBG also announced reference tariffs for capacity. Entry tariffs at the Gasbol pipeline will range from R3.99-5.29/mnBtu ($0.73-0.97/mnBtu), including surcharges, in 2023, while exit tariffs will range from R1.67-2.75/mnBtu. These costs can change if there is competition to access the grid.

Tariffs include construction and upgrades to Gasbol's southern stretch, which aim at adding 600,000m³/d of transportation capacity to Santa Catarina and Rio Grande do Sul's exit points by 2024. The compression units' relocation costs total $29mn.

By Flávia Pierry