Understand the impacts of the opening of the gas market in Brazil

With important government initiatives, the gas market in Brazil is entering a new phase of private investment and more fierce competition — which should bring further advancements, jobs and positive consequences for infrastructure in the country.

Do you want to understand how the July 2019 decree is driving this change and what is its potential for transformation for national and international companies? We counted on the help of Elísio Dourado, Regional Manager of Wilson Sons’s, to talk about the subject. Keep reading!

The gas market in Brazil

Even with the first government initiatives to break the state monopoly and open oil and gas markets having occurred in the 1990s, few initiatives have actually expanded the exploration and distribution of this type of product within the national territory.

This led to a certain stagnation, with little activity in the area in recent years and less movement towards the country’s productive potential. This was one of the reasons why, in July 2019, the “New Gas Market” program was decreed, considered a milestone for the Brazilian energy sector.

The idea of the initiative is to give dynamism and competitiveness to the capacity to explore and distribute the resource in Brazil through the partnership with the private sector, which is now encouraged to inject investments and technology in all stages of this chain — from improving infrastructure to operating processes.

As Elísio can tell us first hand (working directly on one of these processes), this new moment in the market has already started: “we actively participated in the first private investment in this sector, Celse’s thermoelectric and regasification terminal in Aracaju. In addition to this project, we have already mapped another major investment with the entry into operation of GNA (Gás Natural do Açu) in 2020.

The supply of LNG originated by the pre-salt will cause the projects in this sector to intensify also resulting in the increase in the transport of LNG through the cabotage modal. Our fleet is already sized to meet these new projects.”

The impacts on the country’s economy

The attraction of investments to the sector does not only mean a boost for companies within it, but a major impact for the entire Brazilian economy. The idea is that this moment affects our country in two important aspects for development:

on the one hand, the entry of foreign private capital can strengthen the currency and serve as a lure for investments in other key sectors;

on the other hand, breaking the monopoly on gas distribution may generate a drop in price, which benefits both the Brazilian population and the export capacity of companies.

This impact is already being observed by the market, as Elísio points out: “we have already noticed a clear recovery in activity in this segment. After 2018 being a year with few operations linked to the sector, in 2019 the volume increased significantly.

We expect 2020 and 2021 to be even better due to the last rounds of concessions and a greater participation of IOCs in the auctions, decentralizing investments in the sector.” Every competition brings advances to a market area, but this is even more impressive when we talk about the energy sector — the engine that drives industry and commerce.

The impacts for the O&G sector

Speaking more specifically about companies in the O&G sector, we can treat the decree to open the gas market in Brazil as an era of opportunities. The prospect is that new investments will reach the order of 240 billion reais and affect the entire chain from exploration to final consumer.

This impact comes not only from concessions and direct investment, but also from the preparation of all initiatives around this moment to grow together with the economy linked to O&G.

Wilson Sons itself is an example of this, as Elísio tells us: “we participate both in the period of installation of the units, providing service to EPCs and in port operations when the terminals come into operation.

WS Rebocadores has a strong presence in this sector, with tugs with high power and equipped with FiFi 1 fire fighting systems that guarantee an extra layer of safety in operations.

Undoubtedly, the WS group’s EHS culture qualifies us to be a prominent player in this sector. We already operate in Pecém, under a long-term contract with Petrobras and in October we will start another long-term contract with Celse in Aracaju.”

This is the type of pioneering spirit expected from companies linked to the sector in the coming years. The entry of new investments and new companies can bring innovative strategies, more efficient production processes and an optimization throughout the path of natural gas in Brazil.

The forecasts for the opening of the gas market

Although the first investments are already coming, there is still a little uncertainty about how long it will take for the opening of Brazilian gas to show its full potential.

The main issue relates to tax and infrastructure for gas flow. The current tax model still needs improvement to foster trade between states and the current gas pipeline network is precarious in the face of future demand.

But what is inevitable is that these investments will come. Many of these concessions are already in the sights of large international companies, mainly European — Shell, Equinor, Repsol, Galp, Engie.

Elísio explains that “these are long-term investments, which generate a significant amount of jobs in the construction of the necessary infrastructure. They also help to improve the country’s logistics infrastructure. Undoubtedly, large foreign oil companies tend to play a leading role in this sector.”

And if this process is inevitable and its impact will be positive, the vision for the future is one of development and competitiveness. All companies related to the gas market in Brazil will have their opportunity to take advantage of a new era and stand out with innovation, efficiency and technology. Is yours ready for this?

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