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Government launches New Gas Market in ceremony at Planalto

ENERGY

For Minister Guedes, program has potential to promote the reindustrialization of the Brazilian economy

The federal government launched, on Tuesday (23/7), in ceremony at the Planalto Palace, the program Novo Mercado de Gas, often called by the Minister of Economy, Paulo Guedes, "cheap energy shock."  

The program foresees the effective breaking of Petrobras' monopoly in the natural gas  market  and the improvement in the regulation of natural gas transportation and distribution in the country, ensuring competition and competitiveness for the sector, in a scenario that points to strong production growth. in the coming years, driven by the pre-salt exploration. The government's main objective with the measure is to reduce the costs of energy and of all industrial production in the country, generating a sharp reduction in the cost of Brazilian industry.

This is what Minister Paulo Guedes defended in a press conference this afternoon: “The new gas market will allow us not only to increase investments in the energy sector, such as gas and oil, but mainly to reindustrialize the Brazilian economy. . The Brazilian industrial economy has suffered a lot in the last 10, 15, 20 years. Industry reached 20% of GDP and shrunk to around 10% of GDP. This is due to excess taxes, high interest rates, energy costs, logistics costs ... So, from today, we are attacking a basic component that decreases and brings down the productivity of the Brazilian economy, which is exactly the most expensive energy. "

Unlike cooking gas, natural gas is considered the gas of the industry since, after being treated and processed, it has a high energy content and is very much used for energy generation and as a raw material in the most diverse industrial segments such as petrochemical, steel, food, for the production of glass, plastics, fertilizers, beauty products and building materials, for example.

Given this, the government expects that the supply of cheaper natural gas plays a fundamental role in the resumption of economic growth, stimulating investments and ensuring competitiveness for Brazilian industry. For Minister Guedes, this is a great opportunity to reactivate our industrialization and generate more investment opportunities, long term growth, employment and income for the country. 

“We estimate that it will be possible, according to our calculations, for the price to fall by 40% in two years, not only for the cost of energy but also for basic industrial inputs. So if we can actually bring that down by 40%, we estimate a possible reindustrialization that could reach up to 8% of GDP within ten years of this drop in energy prices. We are working towards a reindustrialization of the Brazilian economy on cheap energy, ”he emphasized.

Gas market

The reality that Brazil faces today, however, is of a very high price of natural gas: the most expensive in Latin America, according to data from the Energy Research Company (EPE). While in Brazil the industry pays almost $ 14 per million BTU, in Europe - where many countries do not even have production and rely on imported gas - this is around $ 7 to 8 per million BTU, while in the US it is less than $ 4 per million BTU. Thus, the government expectation with “the new gas market” is that the price of national natural gas reaches international levels. 

In addition, as around 20% of total cooking gas (LPG) comes from natural gas, the measure has the potential for the reduction also to reach cylinder gas and the price of energy, as there are thermal plants that use natural gas as fuel for energy production. 

Monitoring Committee 

At today's ceremony, an inter-ministerial decree was created establishing the Committee for Monitoring the Opening of the Natural Gas Market, made up of representatives of the Ministries of Economy, Mines and Energy, the Presidency's Civil House, the National Petroleum, Natural Gas and Biofuels (ANP), Administrative Council for Economic Defense (Cade) and the Energy Research Company (EPE). 

 The Committee will coordinate the actions of the various State agents that will act to effectively break the natural gas monopoly, monitoring the implementation of these actions and proposing new measures to the National Energy Policy Council (CNPE). The purpose of the creation of the committee is the development of an open and competitive natural gas market for the country. 

Background 

On July 8, Cade and Petrobras signed a Cessation Commitment Agreement (TCC) in which Petrobras pledged to free access to the country's gas pipelines and all infrastructure essential to the natural gas sector such as runoff pipelines. , processing units and Liquefied Natural Gas (LNG) terminals. Under the agreement, Petrobras also pledged to waive its stake in 19 of the 27 state distributors, companies that have the exclusive concession for the distribution of natural gas to the final consumer. In Brazil, distribution is a monopoly of state governments. 

Prior to that, at the end of June, the National Energy Policy Council (CNPE) issued Resolution 16 of 2019 which established the regulatory guidelines for opening and promoting competition in the natural gas market that should be adopted in this process during the next few years.