Natural Gas In Brazil: A New Regulatory Framework To Promote A More Competitive Market

• Published date: 11 November 2020
• Subject Matter: Energy and Natural Resources, Energy Law, Oil, Gas & Electricity
• Law Firm: Tauil & Chequer
• Author: Tauil & Chequer

On September 1st, 2020, the Brazilian House of Representatives approved the text of the New Gas Law after 7 years of debates among government, institutions, market players and society. To understand the relevance of this expected change in law and its potential impacts on the Brazilian gas scenario in the next few years, it is important to take a quick look at the background that has brought Brazil to this point.

The current Gas Law (Federal Law No. 11,909) was enacted in 2009, but was not sufficient to encourage a more competitive market opening process - mainly due to the fact that Petrobras continued to exercise its dominant position in the entire gas value chain. The first amendment to the current Gas Law was proposed in 2013 by means of the Bill of Law No. 6,407, and its review gained strong support in 2016, when the Brazilian Federal Government launched the Gas for Growth Initiative.

The Gas for Growth Initiative aimed to reform the Brazilian gas regulatory framework to promote the gas market opening process as Petrobras had decided to divest its gas midstream assets. In 2019, after presidential elections, the Brazilian Government put together the New Gas Market Program, which continued with the same goals and principles of the former Gas for Growth Initiative, to create a competitive and unbundled gas market in Brazil.

Read our presentation on the Brazilian New Gas Market.

A committee to promote the competition in the Natural Gas Market was created by the Brazilian National Energy Council (CNPE), composed by the National Agency of Petroleum, Natural Gas and Biofuels (ANP), the Energetic Research Company (EPE), the Antitrust Authority (CADE) and the Ministry of Mines and Energy (MME). Together, those entities have performed a significant role to set the basis and guidelines for the Brazilian New Gas Market.

In this context, in the Brazilian legislative branch proposed a final text for the Bill of Law No. 6,407/2013, which set forth the following main changes in the current Brazilian gas regulatory framework:

• Authorization for Gas Transportation and Storage - Implementation of the authorization regime for gas transportation and storage, preserving the authorizations currently in force to promote the investment and development of new facilities;
• Entry-Exit Transportation Model - Replacement of the point-to-point transportation model currently performed by Transporters by the entry-exit model, based on the transportation network's gas injection and...