Brazil power consumers take gas plans to ministry

The Brazilian large energy consumers association (Abrace) presented its propositions for the Gas for Jobs group to the ministry of mines and energy today.

Abrace's main suggestions are on how the government can stimulate natural gas supply, drive more demand, help create a competitive market with more liquidity and lead to the reduction of final gas prices. These actions can increase Brazilian GDP by R1.5 trillion ($306bn) through 2032 according to Abrace.

Paulo Pedrosa, Abrace`s president, says the idea is to try to search for convergence among the different industry groups lobbying the government to ask for policies for natural gas, including fertilizer, chemical, ceramics and other industry groups, in addition to gas producers, pipeline operators and consumers.

"We noticed everybody was a bit too triggered in this process and we aim at more convergence," said Pedrosa. "This way we can reduce the background talks and discuss propositions. It's time every group says what they stand for. There is no problem if you disagree with us. We have to move to the next level."

Among Abrace's suggestions are for the government to promote mid- and long-term gas auctions, where prices are defined by bids and offers, not under international prices. With those auctions, aimed at starting gas supply after five years, producers could finance needed infrastructure to reduce gas reinjections and consumers could make investments to expand production lines to take more gas supply, and change machinery to shift away from more polluting fuels. This would also lead the way toward a liberalized market where consumers did not have to just buy gas from the local distribution company.

Another suggestion is for state gas and oil marketing company PPSA to direct the gas it owns to daily gas auctions for a spot market, helping the creation of liquidity and a secondary gas market.

Abrace's ideas are in reaction to suggestions from some groups that the government direct gas to specific industrial sectors or specific parts of the country, to drive pipeline investments in the heartland. Abrace wants the launch of the government's Gas for Jobs efforts to focus on long-lasting changes across many parts of the economy, not just focused actions to help specific sectors or projects, said Pedrosa.

Reducing gas for thermal power generation is another idea suggested by Abrace, and instead drive gas to consumers in industrial sectors.

"Our power matrix is already very clean," said Pedrosa. "We must drive gas to decarbonize our industry, replacing coal and fossil fuels, and not to carbonize our power matrix."

By Flávia Pierry