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Erwin Cifuentes

Erwin Cifuentes

Erwin Cifuentes is a Contributing Editor for Southern Pulse Info where he focuses on politics, economics and security issues in Latin America and the Caribbean.…

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Brazil Seeking Regulatory Changes for Natural Gas Sector

Petrobras Natural Gas

A leading official with the Brazilian energy secretariat said the government is considering enacting changes to regulations for the natural gas industry.

Marcio Felix, the secretary for oil and natural gas at the Mines and Energy Ministry, said that his agency is currently holding meetings with producers and distributors regarding the proposed changes. At a seminar of the Brazilian Petroleum Institute (IBP), Felix noted the new regulatory scheme will be revealed on September 30th, and must subsequently be approved by federal legislators and regulatory agencies.

One of the possible key components of the plan will be the creation of a new oversight body for the natural gas sector, which is an idea championed by the IBP and backed by the regime under interim President Michel Temer. The entity could take the form of a government agency or a non-government entity, Felix noted. Furthermore, the new regulator would be modeled from the National Electric System Operator (ONS) that coordinates and controls generation and transmission of electricity and is itself regulated by the National Electric Energy Agency (Aneel).

"I would call it Brazil's gas developer," said Felix, as quoted by Platts. "But more than just operate the system, this body will have to regulate. There are various issues of a national nature that need to be dealt with than just operating the pipeline network."

The Brazilian government has also indicated other changes that officials believe are needed to boost competition, increase investment, and alleviate the burden on state-run Petrobras. These measures include opening up access to existing natural gas pipelines, expanding Brazil’s relatively small network of pipelines and fixing problems with taxation.

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"We want gas to grow," Felix mentioned. "A large country like Brazil, which is the size of a continent, also needs a large natural gas industry."

Though primarily known as an oil operator, Petrobras is also Brazil’s largest producer of natural gas and has strong control over national gas pipelines and LNG import terminals. Yet the low cost of oil coupled with Petrobras being at the center of a major bribery scandal (“Lava Jato”) has led the firm to cut back on its role in the natural gas area.

As noted in Seeking Alpha, Petrobras is currently seeking to sell or share control of pipelines and opening its LNG terminals to third parties. For example, the firm has already sold its 49 percent stake in Gaspetro to Mitsui & Co. for US$490 million, and could soon sell Nova Transportadora da Sudeste to Brookfield Asset Management for an estimated US$5 billion.

“We want to be the main player in the discussion about the natural gas industry's new model,” observed Jorge Celestino, Petrobras chief of refining and natural gas. He nevertheless advised that any transition to a more competitive natural gas market must be done gradually and responsibly.

By Erwin Cifuentes for Oilprice.com

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