Petrobras promises more competitive natural gas price – 05/26/2023 – Market

Petrobras began offering the market a new menu of natural gas contracts, which should reduce the price of the product, used as fuel and industrial input. The company does not advance values, but says that the objective is to make gas more competitive to attract customers.

The director of Energy Transition and Sustainability at the state-owned company, Maurício Tolmasquim, told the Sheet that the new contracts are already competing for bids opened by piped gas distributors and that it intends to offer better conditions also for large free consumers.

“The idea is to gain customers,” he said, recalling that there is now a large supply of natural gas by private companies in the country. In its public call for new contracts, Comgás, for example, received 14 proposals.

As they are in competition, Tolmasquim did not want to inform what the price reduction is in the new contracts. So far, Petrobras had two products on the market, one with a four-year term and a price equivalent to 13.9% of the Brent oil price and one with a nine-year term, at 12.9% of Brent oil.

The new menu will have five different terms: four, five, seven, nine and 11 years. It also opens up the possibility of using the price of natural gas in the United States as an index and changes points related to volume, with an annual reduction forecast or when an industrial customer leaves the network.

“The client will be able to set up the strategy according to the business model”, says the Petrobras director. Today there are complaints that the company’s current contracts are more expensive than the competitors that arrived to dispute the market, including its partners in the pre-salt layer.

States and piped gas distributors even went to court against the state-owned company after the company launched, in 2021, a new contract raising the price from 12% to 16.75% of Brent for the renewal of about 70% of gas contracts from the country. To renew, companies had to accept the high of 50%.

This week, Abrace (Brazilian Association of Large Energy Consumers) sent a letter to the government asking that natural gas be included in the revision of Petrobras’ fuel price policy, which stopped following the import parity and started to look more the internal market.

“It should be noted that consumers seek to reduce the cost of natural gas based on market conditions in which they operate and on the relative cost of substitute energy sources”, stated the association, which represents large Brazilian industries.

In addition to industries, natural gas is used in vehicles and in homes and businesses in the country, as fuel for cooking and water heating. In the year, with the drop in oil prices, the price of the product sold by Petrobras has already dropped 19%.

Coming from the energy sector, Tolmasquim wants to implement gas contracts at Petrobras similar to those signed today between industries and electricity suppliers, with greater flexibility and products suited to each customer’s consumption.

The director of Petrobras says that the country is about to experience a “new gas shock”, with the start of operation of three large projects of the state-owned company. In 2024, the company expects to complete the so-called Route 3, a pipeline system and treatment plant that will bring 21 million cubic meters per day from the pre-salt layer.

Then, between 2027 and 2028, the giant fields discovered on the coast of Sergipe and a project in the Campos Basin that the state-owned company has in partnership with the Norwegian Equinor will begin to produce. Together, the three have a capacity of around 50 million cubic meters per day.

The volume is equivalent to half of current Brazilian demand, including thermal energy generation — in 2022, with thermal plants operating less, the country consumed 69 million cubic meters per day.

In an effort to try to reduce the price of fuel, the government launched a program in March that foresees using the pre-salt production that belongs to the Union to expand supply and proposes to create a long-term pricing policy for gas.

“The perspectives for the consumer are very good. With more supply, Brazil will have contracts with more interesting possibilities”, says Tomasquim.