Brazil's Government Seeks to Reduce Natural Gas Prices

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Written by Amir Richani for Industrial Info Resources (Sugar Land, Texas)--Brazil's minister of energy and mines, Alexandre Silveira, attended the "International Experiences in Gas Release and Natural Gas and Biomethane Infrastructure Plan" conference on March 18, where he supported natural gas price reductions.

Brazil's government believes that the liberalization of the market, deconcentration of contracts and dropping transport and processing costs will help reduce local natural gas prices.

"I received the challenge from our president Lula to make natural gas cheaper, and the Gas Release is an important step in that direction. It is a bold initiative to break the natural gas monopolies. We need a smarter market, we deserve fair prices and better services. This will only happen with the renegotiation of distribution contracts, with more adequate remuneration. A handful of suppliers cannot control the entire Brazilian market," said Silveira.

In order to do this, the Brazilian Energy Research Company (EPE) published a report looking at liberalization policies from countries such as England, Spain, Italy, France and Romania that could serve as an example for the South American nation.

Brazil has low natural gas prices at the wellhead. However, transport and processing infrastructure services costs were cited as a key reason for consumers' steep natural gas prices.

The majority of Brazil's domestic natural gas production comes from offshore fields in the Campos and Santos basins, which must be transported onshore. In January, Brazil had a natural gas output of 1 million barrels of oil equivalent per day (BOE/d).

Most of the production came from Petrobras (NYSE:PBR) (Rio de Janeiro, Brazil)-operated fields, which had an output of 992,000 BOE/d.

The state energy company also owns a vast part of the country's midstream and downstream capacity, forcing companies to sell their production to Petrobras or use its infrastructure.

Additionally, Petrobras holds the natural gas import contract with Bolivia, from which the country is supplied using the Bolivia-Brazil gas pipeline.

Silveira highlighted that the country could reduce the value of access to flow and processing natural gas rates from US$8.58 per million British thermal units (Btu) to US$1.80 per million Btu, without the sale of liquids, which in turn would help reduce natural gas prices for consumers.

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