End of Agreement With Spanish Naturgy May Mark Opening of Rio de Janeiro’s Natural Gas Market for New Concession Contracts

At the End of the Current Contract with Naturgy for the Two Concession Areas, the State May Relicense the Natural Gas Contracts. Rio de Janeiro Prepares to Explore the High Market Potential in the Segment Over the Coming Years.

The new State Secretary of Energy and Economy of the Sea of Rio de Janeiro, Hugo Leal, commented this Tuesday (01/24) on the future of the energy market in the state. He hopes to explore the high potential of the segment over the coming years with new bidding processes underway. Among them are the new natural gas concession contracts, which should occur at the end of the current agreement with Naturgy.

Rio de Janeiro Studies New Natural Gas Concession Contracts After Agreement with Naturgy

In comments made earlier this week, the new State Secretary of Energy and Economy of the Sea of Rio de Janeiro, Hugo Leal, emphasized the interest in expanding the natural gas market in the state. 

He intends to conduct a new bidding process for gas concession contracts at the end of the current agreement with Naturgy.

The company controls the distributors CEG and CEG Rio, whose concession contracts expire in five years.

Leal also stated that he is considering creating new concession areas in Rio de Janeiro for new contracts, in addition to the two already existing in the state.

The secretary highlights that the reality of the market today is very different from that of 1997. That year, the natural gas service was granted to two concession areas with defined contracts: one for the Metropolitan Region (CEG) and a second for the interior (CEG Rio).

He believes that advancements in the regulatory framework of natural gas could bring significant benefits for future bidding processes to be conducted.

Although Naturgy has a satisfactory contract, Rio de Janeiro needs to take advantage of its high market potential to expand investments.

“I am confident that this operation will be a major attraction for our work here for the new bidding process. We have a new market environment. We will respect the concession, but we must continue to expand this network,” said Hugo Leal.

RJ Aims to Internalize the Natural Gas Market with New Contracts Beyond the Current Ones with Naturgy

The focus now is on the approval of the 4th and 5th tariff revisions of Naturgy — which have been delayed and are set for 2023.

This is because the state of Rio de Janeiro wants to achieve a true internalization of natural gas in the area, with new investments from Naturgy in the segment over the next 5 years.

“There are still five years left [until the end of the current concession contracts] and we will engage in dialogue and demand investments during these five years,” the secretary emphasized.

He also stated that if Naturgy is not interested in new investments in the state market, other companies may turn their attention to the state.

Despite this, natural gas concessions in Rio de Janeiro currently face obstacles. This is because the 4th Tariff Review of CEG and CEG Rio, valid for the five-year period 2018 – 2022, was supposed to have occurred in 2018.

However, the votes were suspended, and disagreements among the stakeholders regarding the tariff review remain present in the state.

In parallel, Agenersa, the state regulatory agency, is reviewing the regulations of the New Gas Law at the state level.

Thus, the new state secretary of Rio de Janeiro is preparing to expand natural gas contracts in the regional market after the end of the agreement with Naturgy.