Natural gas shippers on the Brazilian pipeline grid, and newcomers assessing the viability of shifting away from the captive market, are worried that additional transportation fees and penalties may be prohibitive.
Some of the concerns could be addressed if regulator ANP re-opened discussions on discussing the transportation service contract — seen as too rigid and having more oversight over shippers than pipelines — and by establishing a regular tariff review to reduce impairment costs transferred to shippers.
The average transportation cost under the old model, which is still valid for inherited contracts Petrobras has with some gas distributors, is R9.2379/mmBtu ($1.7730/mmBtu). The new average cost for TAG transportation — the only pipeline with costs approved so far by ANP — is R10.7365/mmBtu ($2.0607/mmBtu), including the basic services cost. With the inflation rate expected to be applied in inherited contracts by March, this difference will shrink since TAG's price already is updated with higher inflation.
"It is hard to understand why the new transportation contracts are more costly than the former ones since the old contracts are those which, in theory, should pay off the investments made for the acquisition of the assets," said João Victor Silva Moreira, regulation director for oil and gas producer PetroRecôncavo, during an online event.
Large gas consumers and suppliers told Argus that the main concerns about the transportation fees are a lack of flexibility in contracts for companies with variable gas intake volumes during a given month. Consumers are concerned about the amount of planning this will take to mitigate penalties from consumption-side volume variations.
The current master contract for transportation is seen as detrimental for shippers, with ship-or-pay penalties as high as 100pc and fines as high as five times the transportation tariff, while pipeline companies have lower fines when failing to deliver gas. Also, fiduciary guarantees are seen as too high, particularly for companies with tangible assets, like distributors and oil and gas producers, and could be lowered.
Some consumers fret about having to pay higher transportation tariffs, or "idle capacity" as described by shippers, to reimburse Petrobras for its investments to build pipelines.
"When we seclude the new transportation tariff without analyzing the penalties for gas buyers, we may be led to think that there is a cost reduction in the transportation part of the final gas cost, and we fear it might be just the opposite," said a person whose industrial company isstudying a shift into the bilateral market.
Gas transportation companies say that most complaints stem from the novelty of and lack of familiarity with the gas market in Brazil, with just a few dozen shippers. With more players, capital spending costs will be shared more broadly, transportation companies say.
Also, pipeline companies understand that they must work on improving service and to listening more closely to shippers' needs to provide more tools for planning. For instance, with a larger variety of transportation contract types — firm, interruptible, short- or long-term — shippers may separate the part of their consumption that may vary and sign different transport contracts, one for the steady intake of gas with higher penalties, and others for the variable share of consumption with fewer penalties.
"The pipeline companies focused in 2021 to hurry to create the possibility for the market to open, and we did not hinder the new gas supply contracts from being signed," said Rogério Manso, president of the gas transportation association AtGás. "Now we have to upgrade the processes."
TAG just released a weekly opportunity for shippers to do transportation contracts. This allows newcomers to the bilateral contract market to enter without having to wait for annual open seasons, as were held in 2021.
