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Brazilian natural gas distributor is eyeing the Argentine gas market while Petrobras retreats

Written by Valdemar Medeiros
Published 14/10/2020 às 11:38
PEtrobras - Natural gas - argentina
Compagas eyes the natural gas market in Argentina

Brazil-based Compagas eyeing Argentina's natural gas market  

Five natural gas distributors in south-central Brazil are meeting this week in anticipation of a second public offering in early 2021. Rafael Lamastra, president of Compagas paranaense, spoke to Argus about the prospects for the new offer and the opening for the Brazilian gas market while state-owned Petrobras retreats.

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What is the outlook for the 2021 joint public offering for natural gas supply contracts, after the initial offering failed to attract new suppliers?

The first joint public offering of Natural Gas was not a failure. Together, the five distributors received more than 50 proposals. Compagas alone received 10 proposals, which we reduced to a short list of four companies. It would have been a failure if we had not received any proposals.

Many of these natural gas suppliers submitted bids because they saw potential improvements in the regulatory environment, because of the (federal) government's efforts to open up the market, and because of Petrobras' agreement with the (antitrust regulator) Cade. But suppliers eventually realized that not much would change in the short term and ended up withdrawing their offers.

What was the final outcome of the auction?

In the end, only one supplier – Petrobras – won contracts. We told Minister Bento (mines and energy) and Economy Minister Paulo Guedes that we regret the failure of the government's efforts to diversify gas supplies and Petrobras continuing to be the dominant player.

Why do you believe next year's bidding will be more successful?

We hope to see some progress, but the reality is that we don't have LNG terminals, our pipelines don't have much excess capacity and natural gas from the pre-salt (offshore) fields is not yet being delivered to southern Brazil.

Pre-salt natural gas was supposed to sell for $4/mn Btu, but for now Petrobras buys or produces all pre-salt gas that hits the market and sets the price. But there have been some positive changes. New technologies have made LNG a possibility and we have been talking to companies interested in bringing gas from Argentina. The upcoming public offering will give us a better understanding of the new supply landscape.

What about Bolivian gas?

Even with the recent announcement by Petrobras to reduce its gas supply contract with Bolivia, we are concerned about the possibility of not having enough gas volumes.

Compagas has held talks with members of the current government of Bolivia and it is possible that part of the gas it currently sells to Argentina will be redirected to Brazil. But we are waiting for the result of the election in Bolivia (October 18). Do you expect gas prices to drop? Yes, but it is a slow process and depends on the entry of more suppliers in the market and on clear regulations for accessing the infrastructure. When all the pieces are in place, prices will drop.

But this cannot be done by decree. While much has already been done, many measures still need to be implemented. But nothing will change overnight.

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Valdemar Medeiros

Journalist in training, specialist in creating content with a focus on SEO actions. Writes about the Automotive Industry, Renewable Energy and Science and Technology

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