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In 2021 the New Gas Law (Law 14,134/21) was enacted to set the new landmark for the gas transportation activities in Brazil.
The New Gas Law’s major changes include:
During the validity of the prior gas law, gas pipeline construction and operation were subject to the concession regime through a bidding procedure, which proved to be impractical and bureaucratic and did not encourage expanding the network. The authorisation regime for gas transportation activities brought by the new law aims at being straightforward, and foresees some steps to be taken for its final granting:
Storage in geological formations
The New Gas Law also establishes that the authorisation regime should be applied to gas storage in geological formations. The goal is to foster investments in the storage activities, ensuring natural gas supply to the market.
Another improvement arising from the New Gas Law is the third-party access to production outflow pipelines, processing units, and LNG terminals through direct negotiation with their owners, based on general access practices and codes of conduct previously established. The ANP must regulate the preference of the owner of the facilities.
The New Gas Law imposes barriers to the gas market verticalisation, prohibiting direct or indirect corporate relationships, control, or coalition between pipeline companies and entities engaged in the exploration, development, production, importation, loading, and marketing of natural gas.
According to the law, professionals in charge of selecting the members of the board of directors, executive officers, or legal representatives of entities operating in the exploration, development, production, importation, loading, and marketing of natural gas must not have access to the pipeline company commercial sensitive information, as well as elect members of its board of directors and executive committee.
The ANP will monitor the natural gas market, adopting mechanisms to stimulate efficiency and competitiveness and reduce natural gas offer concentration, including:
Regulation by the ANP
Since the enactment of the New Gas Law, the ANP has handed down two important Resolutions.
Even with all the improvements brought forth by the New Gas Law, there are still relevant topics which need to be regulated by the ANP, such as:
Finally, it is worth mentioning LNG opportunities. In accordance with the ANP’s 2023 Statistical Yearbook, the size of the gas market in 2022 continued to grow, showing an increase of 3.1% when compared to 2021, totalling approximately 50.3 billion m³. Natural gas imports amounted to nearly nine billion m³, a decrease of 47.1% in comparison to 2021, of which 2.6 billion m³ corresponded to LNG imports.
Based on the foregoing, we expect opportunities for new investments in 2023 and 2024 in oil and gas and renewables in the Brazilian market.
Paulo Valois, OneLegal Partner
Originally published in Chambers and Partners