Gaseoducto Brasil

Brazil promotes its new Gas Law that is expected to boost sector competition

The new law establishes the general principles for operating in the oil and gas sector in Brazil and is expected to encourage competition and attract investment of between 9 and 11 billion dollars, creating 33,000 new jobs and contributing 0.5% to the GDP growth over the next 10 years.

The law, which was approved on 17th March in the Brazilian Congress and sanctioned by the executive on 9th April this year, establishes general guidelines for the formation of the oil and gas sector. The details of these, in regard to the regulating new rules, will be decided on by the Brazilian Ministry of Mining and Energy.

The Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP in Portuguese) will play an important role as it will be in charge of regulating the market by stimulating the competition and reducing sector concentration.

The new law will promote competition between suppliers and the consequential reduction in overall gas prices for consumers by preventing vertical integration, which is when one sole company is able to control every stage of the resource operations.

The expectation is that this new law translates into lower prices for consumers, as according to the text that was approved by Congress, consumers will be able to change service providers, being able to choose from those available in each part of the country. It also ensures the expansion of the national gas pipeline network.

With the new legal framework in place, the ANP recently granted the first two import permits. The agency is currently assessing 20 processes at this stage, which would result in 20 more permits granted by the end of the year.

What does the new law say

  • It ensures access to essential infrastructure for market stakeholders. This means that the controlling companies of the oil pipelines and processing plants have the obligation to offer their facilities, preventing the natural monopoly from turning into a de facto monopoly.
  • The entry guarantee includes LNG terminals.
  • The duties for the contracting of services will be subject to public opinion and will establish a one-off authorisation for the construction of gas pipelines.
  • It creates an entry and exit model, where companies agree on the gas entry and exit capacities of the pipes to grant ductility for the contractual and physical gas flows.
  • The ANP may seek provisions to demand that stakeholders offer natural gas to promote competition (gas liberation). It will also register the ducts as pipelines under the preestablished circumstances and specifications of the project.
  • It establishes independent regulations between those companies involved in different phases of the gas chain. It prevents vertical integration, by prohibiting a company from having a share, even indirectly, in any company, that grants them with joint control of any transport agents, suppliers, loading agents, or commercial agents of natural gas.
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