Brazil gas distributors fail to shake off Petrobras

A tender for natural gas supply conducted by distributors in northeastern Brazil failed to break the dominant market role of state-controlled Petrobras.

Competition was hampered by a lack of access to LNG regasification terminals and gas pipelines, a spokesperson for Ceara gas distributor Cegas told Argus.

Last year, seven northeastern distributors, including Cegas (Ceara state), Algas (Alagoas), Bahiagas (Bahia state), Pbgas (Paraiba state), Copergas (Pernambuco state), Potigas (Rio Grande do Norte state) and Sergas (Sergipe state), launched the tender offer for a combined 9.4mn m3/d of gas supply.

The distributors received proposals from nine local and international companies. Roughly 98pc of the total demand from the tender offer will go to Petrobras, according to Cegas estimates.

Cegas received offers from European major major Shell and Norwegian LNG company Golar, but their lack of access to Petrobras' Pecem regasification terminal and uncertainty regarding transport fees for pipeline access posed obstacles to proposed contracts.

Although Golar is in the final stages of commissioning a floating storage and regasification unit (FSRU) in Sergipe state, the facility is not connected to regional pipelines.

Cegas expects distributors in the region to sign short-term contracts with Petrobras and to hold a future tender for supply starting in 2022 once the logistical challenges have been resolved.

Cegas officials expressed their concern that the lack of competition will result in higher local gas prices.

In a modest departure from Petrobras, Cegas reached an agreement to acquire 90,000 m3/d of landfill biogas from local renewable energy firm GNR Fortaleza. Cegas already buys 75,000 m3/d from GNR, which plans to increase production to 125,000 m3/d.

PBGas, which received six proposals, announced a two-year supply contract with Petrobras. Algas also plans to sign a two-year contract with Petrobras, but said that because of recent changes to the gas market, it could hold another tender for 2022-24 supply.

Bahiagas, which received four proposals, has not yet finalized negotiations.

Brazil's government is working toward opening up the growing gas sector to more competition. In July, Petrobras reached an agreement with anti-trust regulator Cade to exit gas transport and distribution.

As part of this process, additional pipeline transport capacity will be offered to the market. For the 75mn m3/d TAG and 158.2mn m3/d NTS pipelines, Petrobras recently informed the regulator that it will only use 50pc of the transport capacity available on these pipelines.

Roughly 18mn m³/d of transport capacity will also be available in an open season for the Bolivia-Brazil pipeline (Gasbol) pipeline. But the process was suspended by the oil regulator (ANP) last week at the request of Cade, which identified irregularities that favor Petrobras.

In a separate tender, five distributors from south-central Brazil are in the final stages of analyzing offers to acquire 10mn m³/d of supply.