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Petrobras turns to LNG as drought threatens hydroelectric reservoirs in Brazil

Written by Bruno Teles
Published 14/08/2024 às 13:38
Petrobras turns to LNG as drought threatens hydroelectric reservoirs in Brazil
Brazil finds itself trapped in dependence on LNG

With the drop in reservoir levels, Petrobras intensifies the search for LNG to meet energy demand in the country.

In a scenario marked by a lack of rainfall and a significant drop in the levels of hydroelectric reservoirs, the Petrobras has turned more and more protocols for LNG (liquefied natural gas) as a solution to avoid an energy crisis. This movement occurs amid an increase in global demand for the fuel, which is already facing challenges with high demand from countries in Asia and Africa.

A Petrobras finds itself in a critical position as Brazil, traditionally dependent on hydroelectric power, faces a drought that threatens its main source of energy. With the drop in reservoir levels, the company and other energy suppliers are looking for alternatives, and the LNG appears as the most viable solution, although not the most economical.

Petrobras and other energy companies in Brazil are after six shipments of LNG

According to traders that have direct information, Petrobras and other energy companies in Brazil are after six shipments of LNG to be delivered in September. This strategic move aims to ensure that the country is able to meet energy demand, especially at a time when the need for natural gas is on the rise in other regions of the world, such as Asia and North Africa.

Lack of rain in the North and Northeast regions

The current situation, although worrying, is not as serious as that of 2021, when a severe drought forced Brazil to buy record volumes of LNG. However, forecasts are not optimistic. The lack of rain in the North and Northeast regions has drastically impacted water levels in important rivers in the Amazon basin, such as the Madeira, which is home to two large hydroelectric projects that are at risk.

”…need for greater gas generation in Brazil in the coming months”

Javier Toro, senior research manager at Wood Mackenzie Ltd, reinforces the need to increase gas power generation in Brazil in the coming months. “Due to the worsening of hydrology, we see a need for greater gas generation in Brazil in the coming months,” said Toro. He highlights that, as the drought progresses, consumers and industry will feel the direct impacts on costs, as the use of thermoelectric plants will intensify.

National Water and Sanitation Agency

A National Water and Sanitation Agency (ANA) also issued an alert at the end of July, indicating that two rivers in the Amazon basin were at critically low water levels due to below-average amounts of rainfall during the rainy season. This situation further aggravates Brazil's dependence on LNG.

Petrobras chose not to comment on its operations

Despite the delicate situation, the Petrobras chose not to comment on its fuel sales and purchase operations, leaving up in the air how much Brazil will need to do to ensure that energy continues to flow into the country's homes and industries.

Increase in gas generation

The increase in gas generation is, without a doubt, a necessary measure given the current scenario, but it is a solution that comes with a high cost, both financial and environmental. While the world moves in search of cleaner and renewable alternatives, Brazil finds itself once again trapped in dependence on LNG, trying to balance the scales between keeping the lights on and costs controlled.

The pressure on the global market for LNG It is evident, and Brazil positions itself as a competitor in a game where demand is only growing. Now, it remains to be seen how the country and the Petrobras will deal with the challenges that arise in the coming months, as the drought progresses and reservoirs continue to decline.

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Bruno Teles

I talk about technology, innovation, oil and gas. I update daily about opportunities in the Brazilian market. With more than 2.300 articles published in CPG. Agenda suggestion? Send it to brunotelesredator@gmail.com

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