Petrobras, Potigas index contract to Henry Hub

Market: Natural gas
23/11/23

Brazil's state-controlled Petrobras will supply natural gas to Rio Grande do Norte state distributor Potiguas on a contract indexed only to the US benchmark Henry Hub index.

The oil and gas giant and the distributor signed two new natural gas supply contracts and revised a third deal, according to oil and gas regulator ANP.

The revised contract made Potigas the second Brazilian distributor to sign a contract indexed only to US benchmark Henry Hub index.

The Rio Grande do Norte firm revised its running contract with Petrobras to adjust the price of gas for the rest of 2023 to 13.5pc of the Brent, from 14.4pc previously. The revision also decreased gas supplies in 2024-2032 to 50,000 m³/d from 100,000 m³/d in the original contract.

The 50,000 m³/d difference was renegotiated under a new contract running between 2024-2034. That contract will price gas at 11.9pc of the Brent in 2024-2025. Later, the contract will consider both 11.9pc of the Brent and 115pc of the Henry Hub in equal shares.

Under the third and final contract, Petrobras will increase supply to Potiguas by 20,000 m³/d in 2026-2034. All gas will be priced at 115pc of the Henry Hub, similar to Minas Gerais state distributor Gasmig's 2022-2042 contract, which will also price its gas exclusively with Henry Hub as of 2026.

Potigas' new contracts adopted a fixed transportation tariff for entry into the pipeline, to be adjusted to Brazilian inflation yearly and include clauses allowing for volumes to drop if the distributor's clients migrate to the free market, as has been the standard for new Petrobras contracts.

By Rebecca Gompertz

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