International Finance
Oil & Gas

Brazil liberalisation to unlock natural gas value chain

Brazil gas sector liberalisation
The decision is aimed at stimulating demand from the power sector and at lowering the domestic price of the fuel

Brazil has taken several steps forward to ensure the liberalisation of gas sector control regime. According to the natural gas liberalisation plan, third party investments are now allowed in the gas sector of the Latin American country. The decision was made to boost the investment in pre-salt fields. The new decision will increase competition in the sector, which in turn will drive down the gas prices. At present, Brazil’s gas prices rank as the world’s third most expensive.

The National Council for Energy Policy presented the scheme for opening the gas sector to outsiders last month. Earlier, Petrobras, headquartered in Brazil, was the sole recipient to which producers could sell gas output and this gave rise to limitations in gas purchase options within the country.

The scheme will end the monopoly of Petrobras in the country, which accounted for about 78 percent of the country’s gas production.

The Brazil gas sector liberalisation enables third party investors to transport the gas output. It has also enabled the producers to sell the gas output to local distribution companies, power plants in the transport grid, and industrial users.

Mauro Chavez, principal analyst, Latin America gas and LNG, said: “Once access to gas transport capacity is granted, demand re-contracting will help drive opening the Brazilian gas market. In the next five years, all LDCs and more than 9 GW of thermal power plants will need to sign new gas supply agreements.”

As a result of the decision, Petrobras has agreed to divest its assets, thereby reducing its position in Brazil’s gas sector and opening up opportunities to outside investments. Petrobras will, however, retain control over the gathering and processing infrastructure.

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