Brazil gas standard puts ANP in a conundrum

Market: Natural gas
24/04/23

Brazilian gas market participants are at odds over a proposal by oil and gas regulator ANP to change the allowable chemical make up of natural gas, sparking an extension of an ongoing public comment period.

With more pre-salt natural gas entering overall supply since 2021 — 86pc of current gas production comes from the pre-salt Santos, Campos and Espirito Santo basins — some producers are failing to offer gas to the network that meets the standards. Currently natural gas in the network must be at least 80pc methane with a maximum of 12pc ethane, 6pc propane and 3pc butane, but pre-salt gas tends to have too much ethane in the mix.

Gas market liberalization in 2022 created some challenges for keeping ethane levels in check. In the past, when state-controlled Petrobras had sole access to its gas processing units where ethane and other components can be separated from gas stream mixes, the company could easily maintain the balance. But with other producers now given access to those units, the same standards are not necessarily being met.

During the public comment process, which has been extended by a month to 15 May, producers asked ANP to change the regulation to remove the minimum and maximum limits for each component, and instead keep only the existing measurement of gas' calorific content adopted in the UK, Spain and Norway — the Wobbe Index (WI) — that allows for interchangeability among the gases. For producers, using WI would let them leave more liquids in the gas to increase volume, but chemical companies that use ethane as a feedstock would see less of it since not as much would be stripped out, leaving them to rely more on imports.

Gas producers' wish to increase ethane's share in the natural gas mix would also satisfy a Petrobras request to not to remove more ethane from gas coming from the Route 2 pipeline into the Caraguatatuba processing unit in Sao Paulo state. The processing unit was not designed to separate ethane and a retrofit at the facility would cost around R500mn ($100.6mn), according to market participants.

Glass and ceramic producers also fear changes to the gas component mix. A higher WI would mean the torch in glass and ceramic ovens would work faster, which can affect the quality of glass produced. The glass industry would prefer ANP maintain the current natural gas standard and force Petrobras to update the Caraguatatuba processing unit. Ceramic producers say a more variable gas mix will demand investments in furnaces.

Chemical industry association Abiquim said adopting WI will increase CO2 emissions by up to 7pc, while other associations say the change can reduce the lifespan of machinery and motors and reduce turbine efficiency.

But the Brazilian association of oil and gas producers (IBP) disputes those claims, and says a special authorization issued by ANP in 2020 allowed for a reduction in methane's share of the mix from 85pc to 80pc, which did not cause problems in households or for final consumers in industry.

The public comment on the new gas standards started in 14 February and was supposed to end mid-April, but was postponed to 15 May.

By Flávia Pierry

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22/11/24

Opinion: Bridging the divide

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21/11/24

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21/11/24

Cost of government support for fossil fuels still high

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21/11/24

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21/11/24

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21/11/24

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21/11/24

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21/11/24

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21/11/24

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