Despite Giant Pre-Salt Reserves, Petrobras Takes A Hard Hit From Bolivia As 30% Of Natural Gas Supply Is Cut, Potentially Driving Up Prices For CNG In The Brazilian Market

Brazil And Bolivia Have Contract For The Delivery Of Bolivian Natural Gas, But This Supply Has Been Reduced By 30% In Recent Days

Petrobras may have been caught off guard by the reduction in the supply of natural gas from the Bolivians. Over the course of this month, the volumes sent of the product have decreased by around 30%. The cut amounts to approximately 7 million cubic meters of gas per day, with Bolivia’s state-owned company YPFB usually supplying Brazil with about 20 million cubic meters daily. Even with enormous reserves of this fuel in the pre-salt, the state-owned company is taking a hard hit from the Bolivians, being forced to look for CNG in other markets at much higher prices.

The reduction in the supply of natural gas impacts Petrobras’ operational planning, as this unexpected decrease, according to the state-owned company, means importing additional volumes of liquefied gas (LNG), so that the internal sales contracts of the Brazilian state-owned company are fulfilled, despite being the main responsible for the exploration of the pre-salt layer in Brazil.

It happens that the price of liquefied natural gas (LNG) is much higher. Therefore, the fuel supplied by Petrobras may become more expensive if this situation persists. The Brazilian state-owned company stated that it is seeking appropriate measures for the Bolivians of YPFB to comply with the gas supply contract to Brazil.

The natural gas from Bolivia arrives in Brazil mainly through the Gasbol pipeline, which began operating in 1999, after a contract was signed between the state-owned oil companies of the two nations. From that point on, Brazil began to import increasing volumes of the hydrocarbon. The Brazil-Bolivia pipeline was financed by Petrobras, which took on the volume, as a shipper, of up to 30 MMm³ per day through the take-or-pay regime.

Why Did The Bolivians Reduce The Supply Of Natural Gas To Brazil?

Exports of natural gas from Bolivia to Argentina increased this month from up to 10 million m³/day to over 14 million m³/day. Argentina turned to Bolivian natural gas due to high prices of LNG in the international market, exacerbated by the war in Ukraine. The price of the product reached US$ 30.00/MMBtu in April.

Thus, in the midst of a global energy crisis, part of what was supplied to Brazil was cut, which has vast pre-salt reserves but lacks the infrastructure to fully evacuate them.

At the same time that the partnership with Argentina strengthens, the Bolivian government wants to renegotiate the terms of the contract with Brazil for the supply of natural gas. According to experts, this brings uncertainty to the Brazilian market about the conditions of importation.

It Is Not The First Time That Bolivia Has Failed To Comply With The Natural Gas Supply Contract To Brazil

In 2018, Bolivia did not deliver the totality of the natural gas requested by Petrobras at the time. The average volume imported was 22 MMm³/day that year, while the Brazilian state-owned company had paid for about 26 MMm³/day. Thus, YPFB was fined for non-compliance with the agreement. The amounts have not been disclosed to this day, as they are confidential.

Applications Of Natural Gas

Natural gas is the third most important source of energy on the planet. This fuel is of fossil origin (hence it comes from the pre-salt reserves in Brazil), primarily composed of hydrocarbons (carbon and hydrogen), and is found in a gaseous physical state.

For liquefaction, the purification of natural gas is carried out, which is subjected to a temperature of -162 °C, having its volume reduced by approximately 600 times. It is in this process that condensation occurs (the transition from a gaseous state to liquid).

Natural gas is applied in various sectors. See:

• Light And Heavy Vehicles: used in gaseous (CNG) or liquid (LNG) form, natural gas replaces gasoline, ethanol, and diesel, with excellent performance, and bringing benefits such as cost and CO2 emission reductions, in addition to savings of up to 30% compared to gasoline or ethanol.
• Chemical And Pharmaceutical: natural gas is applied in boilers that generate steam for sanitization, drying of finished and semi-finished products.
• Glass And Ceramics: natural gas serves as a heat source in glass melting furnaces, tempering, and drying raw materials. It can also be used in ceramic kilns that produce flooring and coatings.
• Automotive: Applied in painting drying ovens and molds, finishing torches, heat treatment furnaces, and boilers.
• Textile: natural gas serves in the polymerization and drying of fabrics, in singeing machines, and in steam generation boilers.
• Steel And Metallurgy: used in the preparation of raw materials to injection in blast furnaces, in addition to the processes of calcination, sintering, and coking. In metallurgy, it can be used in heat treatment furnaces, drying ovens, and lithography equipment, sheet cutting, melting furnaces, and for generating a controlled atmosphere (oxidizing/reducing).
• Pulp And Paper: applied directly in drying drums and boilers.
• Food And Beverages: LNG can be applied in drying processes, cooking furnaces, and boilers. The beverage segment demands high steam consumption for production. LNG, in this case, can be used in boilers, as it provides high efficiency to the process and minimizes operational costs.

Source: Gas Local