Government Approves Natural Gas Market Competition Committee in Brazil

The National Energy Policy Council (CNPE) Announced the Approval of the Resolution Establishing the Gas Market Competition Promotion Committee in Brazil.

The National Energy Policy Council approved on Tuesday, April 9, the resolution that creates the Gas Market Competition Promotion Committee in Brazil. The New Gas Market, the name given by the government to the former Gas for Growth, aims to promote market opening to ensure free access to the existing pipeline network in the country, which is 60% idle, according to the Ministry of Mines and Energy.

The “New Gas Market” is a program coordinated by the Ministry of Mines and Energy, developed in conjunction with the Ministry of Economy, the National Agency of Petroleum, Natural Gas and Biofuels (ANP), the Administrative Council for Economic Defense (CADE), and the Energy Research Company (EPE) for the formation of an open, dynamic, and competitive natural gas market.

The expected outcomes of the program are: the utilization of gas from the Pre-Salt fields (Campos and Santos basins), the Sergipe and Alagoas basin, and other relevant discoveries; new investments in infrastructure for the drainage, processing, and transportation of natural gas; an increase in gas-fired electricity generation with a reduction in energy prices; and the reindustrialization of the cellulose, ceramics, fertilizers, petrochemical, steel, glass sectors, among others.

The New Gas Market is based on four pillars, namely the promotion of competition, harmonization and improvement of distribution regulation, integration with the electric sector and the industrial sector, and elimination of tax barriers.

The Committee established within the CNPE, which will have up to sixty days to complete its activities, will contribute to the acceleration of the transition to the new market and will have the authority to:

I. Propose measures to stimulate competition in the natural gas market;

II. Submit to the CNPE recommendations for guidelines and improvements in energy policies aimed at promoting free competition in the natural gas market;

The decision aligns with what Minister of Economy Paulo Guedes has said in search of reducing energy costs to boost industry. He has stated that the government seeks a shock of cheap energy to reduce costs by 50 percent.

Onerous Assignment

The CNPE also approved the draft of the Addendum resulting from the agreement with Petrobras regarding the review of the onerous assignment contract. The agreement will allow the auction of the volume exceeding 5 million barrels of oil provided for in the contract, involving reimbursement to the state-owned company of US$ 9.058 billion. The auction is scheduled for October 28.

“The high availability of excess volumes of oil and natural gas in the Onerous Assignment area and the high productivity of the Pre-Salt fields have drawn great interest from major oil companies worldwide, in addition to placing the Country among the five largest oil producers in the world,” informed the MME

The renegotiation of the Onerous Assignment contract has been dragging on since 2013. The CNPE will meet again on April 17 to discuss details of the sale. The government expects to raise at least R$ 100 billion in the auction.

Grupo Libra is expected to cut 50% of its employees and cease shipping operations on the upcoming 28.