Written by: Felix Tsourakis, Ines Brito
Brazil has been investing in LNG since 1990, starting with the construction of the Bolivia-Brazil gas pipeline, recognising the role that LNG will play in the country’s future energy mix.
Initially, Brazil’s gas and LNG market stayed closed to international players for almost 30 years, while its internal oil and gas industry was growing, rapidly asserting itself as a key regional energy player and a main global energy exporter.
However, ANP, Brazil’s national hydrocarbons agency, and key decision-makers recognised that in order for Brazil to continue its industry’s growth , the best next step would be to open the borders for international investors.
Brazil’s New Gas Law: The 4 fundamental principles
In 2019, the National Agency for Petroleum, Natural Gas and Biofuels (ANP) sent to the Administrative Council for Economic Defense (CADE) recommendations for new policies and guidelines in order to develop the country’s gas market.
On 1st September 2020, the New Gas Law was approved by the House of Representatives.
The New Gas Law focuses on 4 fundamental principles:
Separation: Gas system operators can no longer be directly or indirectly controlled by companies involved in other activities along the gas value chain.
Third-party access to essential facilities: Market participants will have access, on a non-discriminatory and negotiated basis, to essential natural gas facilities to optimize the use of the capacity of these facilities.
In-Out Transmission System: This new, more flexible transmission capacity allocation system will allow more participants to use the natural gas transport service.
Transparency: Network operators provide market participants with operational transparency through available transmission capacity and tariffs for transmission services.
While Brazil's New Gas Law gave the industry better legal stability and opened opportunities for international players to cover the continuously increasing local demand, Brazil’s gas legislation is in immediate need of rules to align state distribution companies, increase access to pipelines and integrate the electricity sector.
When the New Gas Law is implemented, Brazil will be able to develop a competitive and open market, promoting opportunities for new players in the gas sector and reach the goal of 20% participation of intermittent renewable energies in the country’s electricity matrix by 2030, part of Brazil’s expansion plan.
Opportunities for international investors and state challenges
The New Gas Law is an important milestone for Brazil, opening the road for the development of a competitive and robust LNG market. With international investors able to enter the industry, Brazil is looking forward to lower costs for its gas consumption.
A study made by the Empresa Federal de Planejamento Energético (EPE) concluded that there are plans for at least 23 new LNG terminals in Brazil, two of which are under construction, while another 10 are in the licensing phase, and 11 are undergoing initial studies. There are three terminals already in operation: in Bahia, Rio de Janeiro and Ceará. The terminals in operation aim to provide flexibility in the supply of natural gas.
Brazil LNG projects currently at an advanced stage: Terminal Gás Sul; Pontal do Paraná; Santos; Macaé; Porto do Açu; Presidente Kennedy; Barra do Riacho; Barra dos Coqueiros; São Luis; Baía de São Marcos; Barcarena.
The opening of Brazil’s gas market synergizes greatly with the increased exploration activities in the country, and will help increase interest further.
These developments can lead to the country's industrial GDP increasing by 8.4%, significantly improving the international competitiveness of the industrial sector, which accounts for a fifth of Brazil's GDP.
According to Brazil's Ministry of Economy, the changes brought by the New Gas Law will lower prices by 40% over the next few years, stimulating competition and attracting new international investors.
While the new law has been passed, Brazil has to take important legislative decisions in its implementation, and the harmonization of national and state legislation. While ANP is responsible on a national level, states are responsible for implementing the New Gas Law at that level. Some states, including Bahia and Rio de Janeiro, have already prepared for new investors and an open market, but not all of them are ready to receive new investors.
Brazil’s gas legislative environment and investor framework is improving at a quick pace, with constant developments happening on a monthly basis.
Hear more about Brazil's opportunities directly from ANP, including LNG, offshore exploration, pre-salt opportunities, the country’s energy transition plans, and more, at the Brazil Oil, Gas and Energy Summit.