Thursday , April 9 2020
Home / The Barrel Blog / After Petrobras, part II: LNG takes up the mantle in Brazil

After Petrobras, part II: LNG takes up the mantle in Brazil

Summary:
In the second of a series, S&P Global Platts editors weigh in on Brazil’s liberalizing gas industry, with a look at the current and future role of LNG in bringing competition to the country’s burgeoning market. Brazil’s natural gas market opening marked a major milestone in February as private LNG developers imported the country’s first-ever competitively sourced supply and announced plans to significantly expand their distribution of the fuel. On February 6, Golar Power received its inaugural LNG cargo at the port of Sergipe in northeast Brazil. While the company’s 1,500 MW combined-cycle power plant co-located there will consume all of the regasified cargo, the developers hope to distribute future imports to end-users across the region. A business partnership subsequently announced with

Topics:
J Robinson considers the following as important: , , , ,

This could be interesting, too:

S&P Global Platts writes Commodity Tracker: 6 charts to watch this week

Jeffrey P. Snider writes Dollar, Not Bank

Marc Chandler writes March Ends like a Lion, No Lamb in Sight

S&P Global Platts writes Commodity Tracker: 5 charts to watch this week

In the second of a series, S&P Global Platts editors weigh in on Brazil’s liberalizing gas industry, with a look at the current and future role of LNG in bringing competition to the country’s burgeoning market.

Brazil’s natural gas market opening marked a major milestone in February as private LNG developers imported the country’s first-ever competitively sourced supply and announced plans to significantly expand their distribution of the fuel.

On February 6, Golar Power received its inaugural LNG cargo at the port of Sergipe in northeast Brazil. While the company’s 1,500 MW combined-cycle power plant co-located there will consume all of the regasified cargo, the developers hope to distribute future imports to end-users across the region.

A business partnership subsequently announced with Petrobras Distribuidora should help in that effort, giving Golar Power’s imported supply access to an existing 7,600 fueling stations and 95 distribution hubs. The duo have said that their partnership will expand the reach of LNG to new vehicular, industrial and power generation markets – particularly in regions like the northeast that are underserved by pipelines.

Go deeper: Read part I of this series – Brazil’s liberalizing gas market in limbo

New gas market

The promising developments in Brazil’s LNG sector come as the gas industry continues to reel from a challenging start to the government’s regulatory overhaul of the market that started last summer.

After introducing competition to Brazil’s interstate gas pipelines, the government subsequently announced an open season last August for long-monopolized capacity on the Bolivia-Brazil (Gasbol) import pipeline. The contest promised to bring competitively priced supply to rival shippers by January 2020, but was abruptly cancelled just two months later, when regulator concerns emerged about state-controlled Petrobras’ involvement in the process.

A relaunch of the open season has now tentatively been scheduled for August.

LNG imports

Until recently, Brazil’s LNG import market had been controlled exclusively by Petrobras, which has funneled imported supply through its own FSRU terminals at Guanabara Bay, Bahia and Pecem.

After Petrobras, part II: LNG takes up the mantle in Brazil

In October 2016, Golar Power reached a final investment decision on its Sergipe LNG terminal and power plant in a move that came over two years prior to the launch of Brazil’s New Gas Market reform.

While government regulation had not expressly prohibited third-party imports, monopoly control of Brazil’s onshore transportation market by Petrobras had previously restricted other importers and distributors’ access to the country’s natural gas pipeline network.

Across the north and northeast, though, large territories and even entire states are currently underserviced by, or even without, gas pipelines – infrastructure that may never be built in a country as vast as Brazil.

For Golar Power, Petrobras Distribuidora and their potential competitors, those infrastructure challenges make small-scale LNG distribution across the north and northeast potentially critical in helping the region to transition away from diesel, high sulfur fuel oil and other carbon-intensive fuels.

After Petrobras, part II: LNG takes up the mantle in Brazil

Click to enlarge

After winning Brazil’s A-6 New Energy Auction in October, Golar Power has already begun planning its next joint-venture investment in the region – a 605 MW combined-cycle power plant and associated LNG import terminal at the port of Vila do Conde, located in Brazil’s northern state of Para.

Connecting to the grid

As Brazil’s natural gas market continues to grow, LNG is expected to play an increasingly important role in supplying future demand growth there. Nowhere is that more true than the isolated and disconnected markets of the northeast, where end-users will also likely remain untouched by the projected doubling in Brazil domestic gas production over the next 10 years.

Over the near term, though, another of Brazil’s aspiring LNG import projects could have a more immediate market impact, potentially bringing supply to the country’s most extensive regional pipeline grid, connecting states across the south and southeast.

In August, Prumo, BP and Siemens said that they had met conditions required to finance the completion of the first phase, a 1,300 MW LNG-to-power project at the port of Açu in the state of Rio de Janeiro.

The terminal, which is expected to begin operations later this year, makes no small addition to Brazil’s future LNG demand. Upon the completion of its second phase, the project could ultimately consume as much as 295 MMcf/d of imported gas – more than 2.5 standard-sized LNG cargoes per month.

The project could also supply third-party imports of LNG to the southeast pipeline grid – potentially even prior to the arrival of competitively sourced pipeline gas from Bolivia.

Additional reporting by Ryan Ouwerkerk

The post After Petrobras, part II: LNG takes up the mantle in Brazil appeared first on Platts Insight.

Leave a Reply

Your email address will not be published. Required fields are marked *