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Government prepares controversial decree for ANP to intervene in gas production: Measure faces resistance and may be questioned

Published 25/08/2024 às 10:36
natural gas
Photo: Reproduction

The controversy in the energy sector: Decree authorizing ANP intervention in gas production faces divisions in the government and may generate questions

The government of Luiz Inácio Lula da Silva (PT) is in the final stages of drafting a decree that will allow National Oil, Gas and Biofuels Agency (ANP) intervene directly in the natural gas market.

This measure is part of the “Gas to Use“, one of the central initiatives of the Ministry of Mines and Energy (MME) under the leadership of minister Alexandre Silveira. The objective of the program is to reduce the gas price natural in Brazil, a vital input for several industries.

According to sources close to the government, the decree is still undergoing final adjustments before being submitted to the National Energy Policy Council (CNPE) in a meeting scheduled for next Monday (26).

The content of the proposal, already confirmed by people involved in the discussions, provides for authorization for the ANP order companies to expand their natural gas production, which may include reducing reinjection of gas in wells of oil and increased production in fields already in operation, including those considered mature.

controversial decree for ANP to intervene in gas production – Photo: Reproduction

Reducing natural gas reinjection as a strategy

The gas reinjection technique, which consists of returning natural gas to wells to maintain the pressure of oil reservoirs and optimize oil extraction, is highlighted by the MME as one of the factors that contribute to the high price of natural gas in Brazil .

ANP data show that, in June, 56% of natural gas production was reinjected, mainly in pre-salt fields. This percentage is significantly above the international average, which is around 25%.

The MME argues that reducing gas reinjection and the consequent increase in the supply of this input in the Brazilian market can help reduce costs for the industry. Furthermore, the ministry defends the need to expand the infrastructure for transporting natural gas to the continent, which could increase the supply available on the market.

Impact of the New Gas Law on government intervention

However, the measure is not unanimous within the government. A group of technicians warns that the ANP's intervention in companies' production decisions could be interpreted as a breach of contract, especially in relation to fields that already have established development plans.

Some technicians from the ANP itself assess that the decree could go beyond the powers established by the New Gas Law, approved in 2021, by creating new obligations and restricting producers' rights.

The decree also provides that the ANP may determine the review of ongoing field development plans, which would affect companies such as Petrobras, responsible for more than 87% of oil and gas production in Brazil, as well as other foreign companies that operate in the country.

If companies are unable to meet the new requirements, the decree allows the operator to voluntarily transfer the right to the field to third parties or, in case of non-compliance with the clauses, for the ANP to open proceedings to terminate the concession.

Natural gas infrastructure and tariff regulation

The forced review of development plans can be considered a breach of contract, as some government technicians point out. The choice to extract more or less natural gas is generally made based on an economic feasibility analysis that takes into account the construction of gas pipelines to take the gas to the continent or its reinjection to accelerate oil extraction. Any government interference in this decision would require adaptations to extraction platforms, which would result in additional costs for companies and could impact prices.

Furthermore, there is a risk that this intervention will discourage new investments in the oil and gas sector, especially in the development of new fields. However, defenders of the decree argue that the ANP already has the competence to monitor and review field development plans and that the proposed changes only aim to adapt the projects to the new government guidelines.

The decree also provides that the ANP may order the adaptation of the operational capacity of infrastructures for the production, flow, treatment, processing and transportation of natural gas. In practice, this means that the agency could determine the construction or expansion of infrastructure, which, according to critics, represents a significant intervention in business decisions.

Another controversial aspect of the decree is the regulation of tariffs paid by third parties to access offshore gas pipelines, currently negotiated directly between the parties. With the new decree, the ANP would have the power to regulate these tariffs, which could increase competitiveness in the sector, especially in relation to Petrobras, which dominates much of the gas pipeline infrastructure.

Despite the differences, the program “Gas to Use” has been supported by industry representatives, who see the measure as an opportunity to revitalize the natural gas sector in Brazil. Abrace (Association of Large Energy Consumers and Free Consumers) highlights that the initiative can rekindle market optimism and boost the energy transition in the country.

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Fabio Lucas Carvalho

Journalist specializing in a wide range of topics, such as technology, politics, shipbuilding, geopolitics, renewable energy and economics. I have been working since 2015 with prominent publications in major news portals. My degree in Information Technology Management from Faculdade de Petrolina (Facape) adds a unique technical perspective to my analyses and reports. With over 10 thousand articles published in renowned media outlets, I always seek to bring detailed information and relevant insights to the reader. For story suggestions or any questions, please contact me by email at flclucas@hotmail.com.

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