Authors: Peter Howard Wertheim and Dayse Abrantes

Brazil is getting serious about loosening the hegemonic grip of Petrobras. Allowing the company to sell off assets and get out of non-core sectors is central to the government’s natural gas strategy.

In July 2019, Brazilian President Jair Bolsonaro inaugurated the New Gas Market program, aimed at cutting the domestic price of gas by 40% within two years, guaranteeing participation of new entrants and attracting greater investment to the sector.

Petrobras says it controls around 77% of Brazil’s gas production, 100% of imports, 99% of processing and 69% of transport, as well as 20 of the 27 state distributors.

Brazil’s natural gas prices are among the highest in the world.

The potential opportunities for reforms are enormous. It is estimated that the gas industry expansion could attract $32billion in total investments.

The Brazilian Association of major power consumers (Abrace) calculates that a 40% reduction in gas prices would increase GDP by 2.2% – 2.6% annually over the next 10 years—a cumulative increase of R$325 billion ($81.35 billion) relative to the present scenario.

Most of the country’s existing gas infrastructure is around the populous south and southeast.

Brazil has less than 50,000 miles of gas pipelines—for transport and distribution. The US has 4 million miles. Gas infrastructure connecting the offshore pre-salt fields to shore have been particularly underdeveloped.

Due to lack of transportation pipelines, more than half of total domestic production is either flared or injected.

Brazil is also targeting innovative ways to overcome the limitations of its inadequate grid infrastructure, with emphasis on more gas-fired power generation.