Why Brazil’s govt is stepping up pressure on the oil and gas watchdog
Brazil’s government has been increasing pressure on oil and gas regulator ANP to speed up the development of the natural gas market.
On Tuesday, during the Gas Week event in Brasília, mines and energy minister Alexandre Silveira urged the agency to fulfill its regulatory agenda, particularly regarding the regulation of third party access to essential gas infrastructure, which is primarily owned by federal oil firm Petrobras.
“The agency’s failure to regulate the method of calculating prices for the flow and processing infrastructure encourages Petrobras to set them as it sees fit. It’s therefore up to the agency to impose fair and adequate prices for the system,” said Silveira.
Nearly four years after the enactment of the new gas law, aimed at liberalizing Brazil’s market, Petrobras, which accounts for the bulk of national output, remains the dominant player.
The Gas for Employment decree mandated the ANP to regulate the matter and establish “fair and adequate compensation for invested capital” for the use of essential infrastructure.
Another federal initiative, the natural gas market concentration reduction program (Gas Release), requires companies with shares of over 50% to auction part of their gas to other players.
Silveira also criticized what he called “true oligopolies” in the gas sector.
“True oligopolies, formed under the previous government, hinder national growth by making natural gas and cooking gas more expensive. And as powerful as they are, they are being confronted by our government,” he said.
Silveira added: “It won’t be the attacks I’ve suffered that will intimidate the implementation of our policies.”
Other clashes
The minister has picked fights with the gas market before.
As the government wants to increase the supply of natural gas to facilitate industrialization, the large volumes of fuel reinjection by Petrobras have led to clashes.
“I understand that it’s possible for this gas to arrive in larger quantities and immediately at a lower price,” Silveira said in 2023, when Petrobras was led by Jean Paul Prates, who was not well liked by Silveira.
Even though Silveira’s relationship with current CEO Magda Chambriard is better, the Gas Release program may generate frictions, since the company raised concerns about the effects on its business.
Transparency and price
In a press release, the Gas Forum, which brings together various industry associations, said that delays at the ANP are preventing the full implementation of the benefits of the new gas law.
“Of the 15 issues related to the natural gas market included in the ANP’s regulatory agenda for 2022-2023, only three have been concluded so far,” Gas Forum president André Passos said.
The dominance of Petrobras and the lack of transparency in access to essential infrastructure owned by the company, as well as high gas prices, were cited as challenges by the organization.
According to the Gas Forum, the fuel reaches industries for approximately US$20/MMBTU (million British thermal unit), compared to US$2/MMBTU in the US and US$10/MMBTU in Europe.
To overcome these challenges, the group supports the implementation of the Gas Release program and calls for a guarantee of transparent and non-discriminatory access to essential infrastructure.
