February 5, 2020
If regulatory and economic conditions are not created quickly, Brazil will renounce a fundamental energy source
Today the world is going through an energy transition phase, where the trend is the growth of renewable energy sources (water, wind, solar, waves, currents), with the progressive replacement of fossil energy sources (coal, oil and natural gas) . In this context, Brazil is a privileged country, our primary energy matrix represents 45% of renewable sources. In the case of electric power generation (EP), this percentage rises to 83% of renewable energies, which represents one of the cleanest electric arrays in the world, the result of hydroelectric generation, which has been with us since the beginning of our modern development.
Even with the ultimate goal of decarbonizing the energy matrix, many countries have chosen natural gas (NG) as the main transition energy source, with the central justifications for it being a primary source of great availability, competitive cost and, among fossils, that of lower level of CO2 emission. China and the United States, for example, have achieved a significant reduction in emissions with increased consumption of NG.
If regulatory conditions are not created, Brazil will renounce a fundamental energy source
Brazil has historically been a country poor in gas resources, having used imports of Liquefied Natural Gas (LNG) and Bolivian gas to complement the domestic production to supply the national market. The high cost of imported gas contributed to an uncompetitive gas supply in Brazil, with important economic impacts for the industry and the national electricity sector.
In the case of industry, the high gas prices directly affect the competitiveness of the sectors of basic inputs that are intensive in NG (steel, iron ore, aluminum, chemical, ceramic, glass, paper and cellulose). These sectors have undergone a process of rapid deterioration of competitiveness in the domestic and international markets. In the electricity sector, the high cost of thermoelectric plants powered by imported NG is decisive for fixing the price of electricity contracts, notably in periods of low hydrology.
The pre-salt discoveries point to a potential to offer significant volumes of NG to the national market. It should also be noted that the recent discoveries of light oil and NG in the offshore portion of the Sergipe-Alagoas basin, with a minimum potential of 15 MMm3 / day of NG, create extremely favorable prospects for the use of NG in a region that has been demanding expansion of its generation local thermal power plant.
Pre-salt gas is associated with oil and its main characteristic is low supply flexibility. In addition, the commercial use of this offer will depend on huge investments in the transportation, processing and logistics infrastructure for transportation and distribution. In turn, the economic viability of these investments depends on firm market guarantees for NG and on dry gas prices.
It is possible to develop a firm market for pre-salt gas through thermoelectric plants that dispatch at the base of the electrical system. Thermoelectric generation on the basis of 5 to 12 GW, can demand up to 60 MMm3 / day, for a new potential supply of 105 MMm3 / day of pre-salt NG in the Southeast Region. Currently, most of the thermoelectric plants are flexible and are dispatched in a complementary way to the hydroelectric and other variable renewable sources (solar and wind). In order for new thermoelectric plants to be anchors for the pre-salt gas, regulatory changes are necessary to increase the part of thermal generation that is inflexibly contracted, with dispatch at the base.
In a study carried out by the Energy Institute of PUC-Rio, scenarios were generated and simulated, maintaining the total of thermal plants and the cost estimated by the national energy planning (PDE-2017), varying the proportion between new firm and flexible thermals according to with gas price scenarios. This study demonstrated that an offer of domestic gas at lower prices than imported gas would allow to increase the volume contracted in the firm mode, with the respective reduction in flexible contracting, without generating additional costs for electricity consumers.
It was also observed that with the increase of thermals at the base, water storage grows, enabling the use of additional potential in the control of intermittences. Furthermore, the results of the simulations also showed irrelevant variations in the pouring of water reservoirs and in the increase in emissions. In the worst environmental scenario, there is no significant change in CO2 eq emissions, with an increase of around 0.32% of the emissions ceiling in the Brazilian energy sector defined in the Paris agreement.
Given the limitations of hydro expansion and the variability of wind and solar generation, thermal generation with NG presents itself as the appropriate technology in the short-medium term to meet energy and electrical security, and once again strengthening the role of NG in energy transition.
With regard to the price of dry gas, it is possible to make the necessary investments feasible for supplying the market with NG prices at levels below those of imported gas. This is because the pre-salt gas is very rich, with a significant presence of LPG and natural gasoline. The processing of rich gas allows to separate these products, which can be commercialized, contributing to amortize the cost of the gas flow and treatment infrastructure. Thus, in addition to the supply of thermoelectric plants, the new offer of pre-salt at competitive prices would allow the development of other market segments, such as CNG and basic input industries.
Finally, it is worth mentioning that the economic logic and the pace of development of the pre-salt oil fields are dictated by oil and not by NG. Thus, it is essential that adequate policies are introduced to make the use of gas feasible, instead of its reinjection. If economic and regulatory conditions are not created quickly, Brazil will renounce a fundamental energy source for the competitiveness of our economy and environmentally friendly.
Source: Valor |
Brazil Energy Insight 
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