Brazil New Gas Law Policy Brief

6 BRAZIL ’ S NEW GAS LAW

INSTITUTE OF THE AMERICAS POLICY BRIEF

The future challenges Despite promising expectations, it is still too early to say whether Brazilian gas will be competitive in the international market or even when compared to other domestic sources of energy. The main challenge remains reducing the price of gas. With the introduction of the gas law, it is expected that a further opening of the gas sector, with more producing companies competing in the market, can bring greater transparency to the composition and disclosure of prices. A potential increase in the supply of gas and quicker, cheaper access to transport facilities will play a part too. BNDES (Brazil’s development bank) estimates that the domestic supply of gas could double over the next 10 years, mainly from the Pre-Salt production. Today, Brazil has some of the highest prices in the world for natural gas, which seriously hinders the competitiveness of the national industry. According to the Ministry of Mines and Energy, in 2020, average prices for the industrial sector remained around $12- 14/MMBTU, which stands at the triple of US prices and double of most European countries. Industrial production at this rate is practically unfeasible. Industry experts state that, in order to be competitive for the

petrochemical industry, natural gas needs to be around $ 5-7 per million BTU.

Other relevant topics to note are the challenges imposed by Pre-Salt offshore conditions and the high content of contaminants such as CO 2 and H 2 S, whether it will be necessary to intervene in the levels of gas reinjection in the Pre-Salt fields, whether there will be a steady demand to absorb a larger supply of gas, and how can the market attract investments for the construction of new outflow routes for the pre-salt gas. Transport is another challenge for the new gas market. Brazil only has 9,400 kilometers of gas pipelines. Argentina, the USA and Europe have 16,000 km, 497,000 km and 200,000 km of pipelines, respectively. Oil and gas platform. Photo: Shutterstock/curraheeshutter

April, 2021