Page 5 - LatAmOil Week 45

LatAmOil COMMENTARY LatAmOil

If it does, its citizens and businesses will be in in late October.
a position to benefit from the “shock of cheap Likewise, Gustavo Labanca, CEO of Trans-
energy” that Economy Minister Paulo Guedes portadora Associada de Gás (TAG), one of the
promised last year. country’s largest regional gas transport opera-
tors, believes that the power-generating sector
Price considerations will help drive demand for LNG.
This “shock” may have even more impact “One of the anchors for new gas investments
because of developments on domestic and in Brazil [is] the gas-fired [thermal power]
global energy markets. plants. The Brazilian power market needs flex-
Brazil does have gas reserves of its own, and ibility, and LNG brings this flexibility,” he said at
officials in Brasília have talked before about the the same seminar.
possibility of using more of these reserves to sat-
isfy domestic demand. However, this approach Support from the new legislation
does have some drawbacks, including the fact Under these conditions, the government’s com-
that most Brazilian gas is not natural gas but mitment to reform – as outlined in the original
associated gas that must be either processed out “New Gas Market” policy and as elaborated in
of crude oil from offshore oilfields or re-injected the bill discussed above – will be important.
back into the same fields. The former option car- It will help ensure that independent suppliers
have access to the terminals needed to import
ries costs for producers. It also entails additional nect these terminals to regional markets. This, in “
costs related to the establishment of new infra- LNG and to the trunk pipelines that will con- The bill under
structure, in that the gas is being extracted from discussion has
fields that may not be connected to onshore gas turn, will help ensure that local distributors have
markets by pipeline and may not have access more options for securing the gas they need to the potential to
to onshore transportation and distribution deliver to end-users.
networks. Under current Brazilian law, distribution is make gas more
These considerations have served to drive under the control of state governments. The bill
up Brazil’s domestic gas prices, and the national that was discussed in the Chamber of Deputies widely available
oil company (NOC) Petrobras has tried in the in September allows each state to make its own throughout Brazil
past to offset some of this gap by importing gas decision as to whether to preserve this monop-
by pipeline from neighbouring Bolivia. How- oly or open local markets up to third parties to
ever, this option has become less attractive as some extent.
global gas prices have come down. Petrobras These policies will allow the country to make
has therefore reduced the volumes of gas it buys the most of the gas infrastructure and assets it
from Bolivia and has turned instead to imported already has, according to Lisa Viscidi, the direc-
LNG, which has grown much cheaper as a result tor of the Energy, Climate Change & Extractive
of rising production in the US and elsewhere. Industries Programme at Inter-American Dia-
logue (IAD). “The policy is expected to lead to
LNG and power generation more efficient use of existing infrastructure,
As a result, Brazilian demand for LNG is on lower natural prices for end-users and growth
the rise. And according to a note from Rystad in natural gas demand in Brazil,” she told News-
Energy, this rise is set to continue, especially as Base. “The reform aims to expand the number
domestic electricity consumption climbs and of players in the gas supply market to generate
gas-to-power projects move forward. “Brazil is competition and allow access to infrastructure
set to be at the centre of LNG demand in Latin so those new suppliers can reach consumers.”
America over the next few years, as the country Additionally, it has the potential to help make
expects natural gas to play a greater role in power gas more widely available. As Henrique Anjos, a
generation,” the Norwegian consultancy said. gas and research analyst with Wood Mackenzie,
Décio Oddone, the former ANP chief who explained to NewsBase: “The new law under dis-
now serves as CEO of privately owned Enauta, cussion changes the pipeline regime from con-
also expects LNG to play a more pivotal role in cession to authorisation. This is considered as an
the Brazilian energy industry. “So Bolivian gas, important step for new investment in transport
pre-salt gas, onshore gas, they will all compete infrastructure, which can support natural gas to
with LNG,” he said at an online industry seminar reach remote areas in Brazil.” ™

Transport and distribution networks will be open to third parties (Photo: Centro Brasileiro da Infraestrutura)

Week 45 12•November•2020 www. NEWSBASE .com P5