In recent decades, in Brazil, natural gas has been seen as an unwanted by-product, almost a refuse of oil extraction. Its most obvious destination is usually the reinjection in the producing wells or in flaring pure and simple. With a pipeline network inferior to the one in the Netherlands, although it has 197 times greater territory, Brazil has never been able to develop its market.
Economy Minister Paulo Guedes is convinced that the country needs to change this momentum in order to take advantage of a historic opportunity going ahead with the pre-salt. For him, this opportunity is as unique as the recovery of American industry, thanks to the cheap energy shock from shale gas.
Carlos Langoni, a former president of the Central Bank and the first Brazilian to complete a Ph.D. at the University of Chicago, became a major contributor to the idea of becoming the enthusiast of natural gas as the engine of reindustrialization. The two have been talking almost every Friday about it. Marco Tavares, founder of Gas Energy consulting and a pope in the industry, helps with technical information.
The minister wants a package of infra-legal measures, without the need to go through the National Congress, ready in about 60 days. He intends to act both in the “monopoly breach” and in demand. However, according to their interlocutors, there will be no immediate effect in the tariffs. Nothing to compared, for example, to MP 579 – a fateful provisional measure by which former President Dilma Rousseff forced a 20% reduction in energy bills.
With pre-salt, the net gas supply produced in Brazil is expected to jump from 65 million to 111 million cubic meters per day between 2017 and 2027, according to the Energy Research Company (EPE). Too high a volume to burn or reinject.
The problem is how to create a market for so much gas. Today the input costs $ 11 to $ 13 per million BTU (reference unit in the industry). There is no increase in the consumption of the raw material at this price. Therefore, they work with a goal of cutting the value to half of what is currently charged at the end point.
The strategy involves firm actions in the gas transportation and distribution segments. In state-owned distributors, Petrobras is a relevant shareholder in almost all companies and there are complaints about conflicts of interest. Industry sources comment that even though Petrobras has sold transportation pipelines, it continues to exercise a monopoly guaranteed under contractual clauses. Pipelines may be idle, but other producers and potential consumers are unable to access them.
The key to reorganizing the market may be in a lawsuit at Cade investigating possible restrictive Petrobras conduct in the natural gas market. No one likes to say this publicly in the economic team, but it may be a perfect alibi for the sale of state-owned assets in the area. The company’s current command is in tune with this thinking, it likes the idea of focusing more and more on exploration and production, but may face difficulties with minority shareholders to voluntarily opt out of business or contractual clauses that give it a monopoly.
At the same time, in the new rescue plan for states in financial difficulties, the Union should require, as a counterpart, an adhesion of governors to nationally defined parameters for the free gas market. Today, only São Paulo and Minas have a regulatory framework more favorable to the figure of free consumers. Rio Grande do Sul, for example, does not even have regulation.
If this whole primer is well applied and the price actually falls, “on merit rather than magic,” the national production of fertilizers and new gas blast furnaces, instead of coke, can be made viable, for example.
Paulo Pedrosa, former executive secretary of the Ministry of Mines and Energy, now president of Abrace (the association of large industrial energy consumers).
“You trigger competitiveness and promote re-industrialization,” says Pedrosa.
For Guedes, it would be a political feat and much more. To industrialists, he could take the keynote that he intends to open the economy, yes, but giving real conditions for competition. With a cheap energy shock.
Source: Valor Econômico