Major domestic upstream projects and a new dynamic for imports from Argentina could significantly expand natural gas supply in Brazil in this decade. But uncertainty around demand growth and regulatory clarity may determine actual market growth, crude, gas and biofuels institute IBP's executive director Sylvie D'Apote told Argus. Edited highlights follow.
Brazil's gas market has several ongoing projects to increase supply, such as the equatorial margin, the Pelotas basin and a gas storage initiative in the northeast. What are the project's main opportunities and challenges ?
It is still too early to tell whether the equatorial margin or Pelotas will result in commercial discoveries or whether such discoveries will be gas-rich. While these are promising exploration frontiers, their contribution to gas supply remains uncertain at this stage.
It is more relevant to focus on projects that are already advancing and are expected to significantly increase available gas volumes over the next 5-10 years. Two developments stand out: the Raia project, offshore Rio de Janeiro, and the Sergipe Aguas Profundas project in the northeast.
Together, these two projects are expected to add approximately 50mn m³/d of supply, roughly equivalent to the current firm gas market in Brazil. This represents a step change in available volumes and highlights Brazil's near-term supply potential.
Onshore gas production is also expected to grow. While smaller in scale, these projects can play an important role in regional development and may offer more competitive supply, especially at a local level.
Gas storage is also critical for market development. It is essential to increase flexibility, improve system balancing and support a more liquid and resilient gas market. But its development depends on a well-defined regulatory framework and a viable business model, including clear rules on access, tariffs, remuneration, and risk allocation.
Overall, the potential for supply expansion is significant. The key challenge is to ensure that this potential translates into effective market expansion. This will require regulatory clarity and, critically, the development of firm demand capable of absorbing these additional volumes.
More Brazilian participants are seeking authorization from hydrocarbon regulator ANP to import Argentinian gas. What can we expect from interactions with neighboring countries?
The extent to which Argentinian gas can penetrate the Brazilian market will depend on its competitiveness and its ability to integrate into Brazil's increasingly diversified and competitive energy market. Brazil has multiple sources of gas supply — including pre-salt production, onshore gas, LNG and Bolivian imports in the medium term. Any additional supply must compete on price, flexibility and reliability.
Securing long-term, firm contracts in Brazil, which are typically required to underpin cross-border infrastructure investments and ensure the viability of regional integration, will also be a challenge.
Therefore, Argentinian gas is more likely to play a complementary role in the near term — functioning as "opportunity gas" within supply portfolios — rather than serving as a structural solution for the Brazilian market.
What will be the Middle East war's impacts on Brazil's gas market?
The main risk for Brazil is increased price volatility and exposure to global market shocks. The war has had a direct impact on global LNG dynamics, temporarily removing a significant share of LNG supply from the market and tightening the global balance. This has led to higher spot prices — particularly in Asia — and redirected LNG flows.
Brazil, as a marginal LNG importer and a price taker in the global LNG market, is exposed to global price signals and faces stronger competition for available cargoes. This may increase LNG import costs, with a particularly strong impact on power prices, since most LNG imports are directed to power generation and are typically activated during periods of low hydroelectric power output.
Additionally, a large part of Brazil's gas supply contracts is indexed to international benchmarks, meaning that global price movements can also be transmitted to non-power gas users.
At the same time, Brazil is not among the most vulnerable markets. Domestic production — especially from the pre-salt — and pipeline imports from neighboring countries provide a degree of diversification and partial insulation from international shocks. But this does not eliminate exposure. In a sustained high-price environment, Brazil can struggle to secure cargoes, which would increase price volatility for industrial users and power generation, as well as bring broader inflationary pressures.
National energy policy council (CNPE) approved in early April a resolution setting a 0.5pc greenhouse-gas emissions reduction target for the gas market in 2026. How will this impact Brazil's energy transition process?
CNPE's decision to set an initial 0.5pc greenhouse gas emissions reduction target for 2026 will allow the fuel of the future law's policy framework to be implemented.
This lower initial target — the 0.5pc target is below the legal starting point of 1pc — reflects the mines and energy ministry's efforts to balance ambition with realism, taking into account current biomethane supply availability and infrastructure constraints. It is less about immediate impact and more about establishing the foundations of a new market.
Biomethane has clear potential both as a complement to gas and as a decarbonization vector across its various applications. It can also diversify supply sources and enable the expansion of gas use into regions not currently served by the conventional gas network. It also offers opportunities for circular economy solutions, particularly in sectors such as agriculture and waste management.
That said, the policy's success will depend on its implementation. The development of the biomethane market requires careful technical and economic calibration to ensure that decarbonization objectives are achieved without undermining affordability and competitiveness. ANP is facing a significant challenge to design and implement key instruments such as the biomethane certificate of origin, which will be central to market transparency and credibility.
Ultimately, this is a positive step toward decarbonizing Brazil's economy. Its effectiveness will depend on ensuring that the regulatory framework provides clear signals, minimizes distortions and allows biomethane to develop in a way that is economically sustainable and compatible with the gas market's broader competitiveness.
