Overview
The first regulatory framework specifically targeting the natural gas market in
Discussions on the structuring of a new regulatory scenario for natural gas in
Other programs and initiatives followed, including an agreement between
After many years of debates among Federal and State governments, industry agents and Brazilian society, Law No. 14,134/2021 ("New Brazilian Gas Law") and Decree No. 10,712/2021 ("New Regulatory Gas Decree") were finally published to create the necessary basis for the new Brazilian gas market, based on efficiency, competition and best international regulatory practices.
On
Inside the New Brazilian Gas Regulatory Framework
To understand the relevance of the rules created by the New Brazilian Gas Law and New Regulatory Gas Decree and their potential impacts on the Brazilian gas scenario in the next few years, take a look at the main changes promoted by the new Brazilian gas regulatory framework:
1 Authorization Regime for Gas Transportation and Storage
Under previous gas legislation, gas transportation activities were subject to the concession regime, preceded by a public tender process. The New Brazilian Gas Law defines authorization as the exclusive granting regime for gas transportation activities in
2 Transportation Unbundling Rules
The New Brazilian Gas Law establishes corporate restrictions among the gas industry agents, preventing transporters from having (i) indirect or direct corporate control or (ii) an affiliation1 relationship with companies or consortiums performing activities of exploration, development, production (E&P), importation, shipment and commercialization of natural gas.
3 Entry-Exit Model for Gas Transportation Capacity
Under the previous gas legislation, shippers had to contract the gas transportation capacity of each "piece" of the gas pipeline infrastructure, considering the physical flow of the molecule within the transportation system, "congesting" the transportation capacity and promoting inefficient use of the infrastructure. The New Brazilian Gas Law allows shippers to book capacity rights independently at the so-called "entry" and "exit" points, creating gas transportation through zones supported by virtual trading points (virtual hubs).
4 Negotiated Third-Party Access to Essential Facilities
The New Brazilian Gas Law grants thirdparty access not only to gas transportation pipelines, but also to essential facilities (gas offloading systems, gas processing facilities and LNG terminals), which shall be negotiated in good faith and in a non-discriminatory manner by the facilities' owners, who will retain a preference for using its facilities. The third-party access to gas transportation pipelines will be further regulated by
Gas Commercialization
The Brazilian Constitution (art. 25, §2) establishes the monopoly of the States to explore "local piped gas services", also known as gas distribution activity. Gas distribution and gas commercialization activities have always been confused in several Brazilian States, whose local regulation on local piped gas services unconstitutionally incorporated gas commercialization activities into the scope of the State monopoly for gas distribution.
In many States, the rights of local consumers related to gas distribution is limited to the producers and importers, considering the obstacle imposed by the distributors by restricting competition for the molecule in the captive distribution market. Thus, specific regulatory frameworks reach the inconsistency of forcing the producer to sell its gas to the distributor in order to enforce its right of access to distribution, even in cases where the producer is the final consumer of its own product.
Other States, despite admitting the figure of the "free consumer", impose extensive classification requirements and regulations for such an agent, increasing the regulatory cost of these market transactions.
To enable a competitive market for gas commercialization in
Among other aspects, the CNPE Resolution No. 03/2022 established that:
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Reinforcing the separation among competitive activities (such as production and commercialization of gas) from monopolistic activities (such as transportation and distribution) is a strategic guideline for the design of the new gas market in
- The transition to a competitive gas market has the purpose to restrict the transactions among gas traders and gas distributors that are related parties;
- Implementation of gas release programs and stimulation of gas commercialization by producers shall be a policy for the opening of the gas market;
- The active participation of gas suppliers and buyers in the short term commercialization market to enable a higher liquidity and transparence of the gas market is in the best interest of the National Energy Policy.
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This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
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