As capacity agreements for a large volume of natural gas come to an end, Brazil's gas industry is calling for updates to rules for calculating the value of pipeline transportation assets and capacity usage tariffs.
Gas producers and consumers worry they are paying more than they should for capacity tariffs, as the methodology for the calculation and its core input — the asset's depreciation and amortization value — are not transparent.
But pipeline operators argue that the current methodology, drawn up by oil and gas regulator ANP in its 15/2014 resolution, is still valid and that the system of previous calculations for asset values can be used and is available for anyone.
Brazil has approximately 9,500km (5,900 miles) of natural gas pipelines operated by three companies: TBG, NTS and TAG. All were formerly owned by state-controlled Petrobras, which also contracted for all available capacity priorto the gas market liberalization promoted by the 2021 gas law. TAG and NTS were sold to private companies and looked at Petrobras' capacity contracts as expected revenue. Since then, ANP has not reviewed the information on the assets' amortization, depreciation and operation costs. That has also not been released for public scrutiny.
"The topic is a black hole in regulation," a representative from an oil producer said. "There is no transparency and no figures for gas shippers to check, nor estimates for future tariffs."
ANP plans to release an update of the 15/2014 plan for public review by August. The TBG assets' base reevaluation will be carried out in 2024, while the NTS and TAG reevaluations will be in 2025, ANP told Argus. A review of the assets should only take place after the expiration of the contracts in 2025, the regulator said.
"These discussions must take place as soon as possible, as gas shippers have no way to estimate the capacity tariffs in the long term," Adrianno Lorenzon, gas director at the large energy consumers' association (Abrace) said.
Two gas producers who spoke with Argus agree that there is not enough information on the assets' values. The revision of resolution 15/2014 is on ANP's agenda. A final decision is expected in January, but no documents have been submitted for public comments. Pipeline operators are taking their time to send the documents requested by ANP to prepare the propositions, one of the producers told Argus.
Even with the lack of information on the assets' values, investments in new pipelines are advancing. Companies are paying for those investments, instead of having gas shippers pay for them via tariffs. But since this possibility is not written in the current regulation, gas consumers and producers worry these costs can one day be included to the general gas capacity use tariffs.
"There must be mechanisms that encourage the maximization of network use, as any other network industry, with system optimization and a systemic, integrated approach," said Livia Amorim, energy area partner at law firm Souto Correa.
Pipeline operators are confident there is no reason for the gas market to worry about the end of legacy capacity contracts and cost hikes. One operator told Argus that the methodology for the asset base value is well-known, as it considers capital spending, operational spending and an interest rate. The values to this formula are public and can be viewed in previous ANP processes, the operator said.
"A review on resolution 15/2014 is welcome, but does not change the principles," the operator said, adding that the largest hindrance to reduce transportation costs is removing virtual barriers to have just one large integrated grid in Brazil. Currently, shippers must pay multiple tariffs to move gas from one company area to another, creating a "tariff pancake."
