Sergas Negotiates Contract Extension With Petrobras To Reduce Natural Gas Prices Supplied To Sergipe

With the Increase in Natural Gas Prices Implemented by Petrobras in Recent Weeks, Sergas Entered into New Negotiations with the State-Owned Company to Expand the Contract Duration in Exchange for Reduced Fuel Prices

Last Tuesday, (05/17), Sergas announced that it is in negotiations with Petrobras for a reduction in the natural gas prices supplied to the state of Sergipe. Thus, the company aims to secure a continuation of the supply contract for natural gas with the state-owned company in exchange for lower commodity prices, aiming to set prices that do not adversely affect the consumers in Sergipe in the transfer of the fuel.

Petrobras and Sergas Are Expected to Sign the Continuation of the Natural Gas Supply Contract by June to Maintain Natural Gas Prices in the Coming Months

The state-owned company Petrobras has been making some adjustments to its main commodities regarding transfer prices, among them natural gas, which has been the most affected by price increases. Consequently, many fuel distributors throughout Brazil are seeking ways to navigate the current situation and maintain gas receipt prices to avoid a possible scenario of instability in regional markets due to the rising costs of the product. 

The most recent case of negotiations around stabilizing fuel prices is that of Sergas, which is proposing agreements for reducing natural gas prices for Sergipe. Thus, Petrobras has offered price stabilization for the Sergipe company in exchange for the continuation and expansion of the fuel supply contract for the coming years. This way, the state-owned company will be able to maintain its partnership with Sergas and continue to be the main source of natural gas supply throughout the northeastern state. 

With Petrobras’s offer, the state-owned company and Sergas are expected to finalize the contract by early June so that there are no changes in natural gas prices in the state of Sergipe. The state continues these negotiations not only with the Sergipe company but also with other distributors across Brazil. The increase in gas prices has also reached the courts in Santa Catarina, Ceará, Alagoas, Espírito Santo, Rio de Janeiro, and Minas Gerais, and the regional distributors are negotiating new contracts to address the current situation in the oil and gas market.

New Terms of the State-Owned Company’s Contract for Reducing Natural Gas Prices Are Being Well Accepted by Sergas, and Agreement Should Be Established Soon

The current crisis in the Brazilian fuel market is due to Petrobras’s decision to increase the indexing of natural gas prices concerning oil, from 12% to 16.75% of the Brent barrel. Consequently, natural gas prices are expected to rise significantly over the coming months, and Brazilian distributors are starting to prepare for the future scenario. Thus, the oil company is presenting a series of new terms for its contracts with these companies. 

Among them, the primary term is a 12.6% indexing of Brent’s price until December 2023 and 12% starting January 2024, which will ensure more stability in commodity prices for the companies. However, Petrobras will only implement reductions in natural gas prices in cases where companies secure contracts for the next nine years, as is the case with the current negotiation with Sergas.

Finally, the state-owned company is also negotiating a curve for reducing contracted volumes with Sergas, and President Valmor Bezerra highlighted that “This volume can be larger, even up to 100% if we want, or smaller. We consider this proposal from Petrobras to be quite competitive. The timeframe provides us with security and transparency, including on price.”