All you must know about the new Gas Law

The New Gas Law for natural gas is an old demand of all commercial and productive chain of this sector that is finally being put in motion. Do you know what it means to the market as whole?

We will present in this article a complete overview of the current situation of the Bill and the impacts of the opening of the O&G market on an industry that now gets even more competitive.

We have counted with Luis Fernando Priolli, from Mendes de Almeida Lawyers to better understand the importance of this law. Keep reading!

What is the present scenario for the New Gas Law?

Historically, the Brazilian O&G Market has been very restrictive on the international participation. It is an extremely vertical structure, in which just a few players are able to participate in the chain before the end consumers.

Even with such big obstacles to enter this Market, the Brazil O&G industry has always invested in innovation, efficiency and development of structure – like technologies that facilitate gas production.

However, whilst the restrictions may reflect the power of Brazilian companies, they evidence the squandered opportunity of having new minds and new capital in this equation.

And this is exactly the proposal of the law, i.e., to deal with the imbalance between growth and control – increase the commercial power and the competitiveness of the sector without abandoning regulation. As Luís Fernando points out, “remove some of these obstacles, or at least minimize them.”

What changes with the New Gas Law?

As we can see from the date of the Bill 6407/2013, seven years have elapsed from its submission, and the Congress has been debating it since then to ensure that it is indeed a positive potential for the market and industry of Brazil.

 “Just like the European Directives, the change in legislation and regulation in this sector does not take place at one go. The consolidation was achieved in stages, very defined marks”, says Luis.

The two main pillars of the law are the de-verticalization of the exploitation – being considered as a network industry – and the injection of foreign investment in the development of the entire chain. Over R$ 30 billion of foreign investments in infrastructure are expected.

The intention is to create a true new market for the Brazilian O&G sector: from the competitiveness of companies that may have easier access to the different stages of the chain to the possibility of consumers selecting their supplier. 

Based on these ideals, Luís Fernando projects the following main benefits of the law:

• Investments in the sector;
• introduction of new players;
• job creation;
• municipal, state and federal tax increase;
• development to a low carbon emission economy and utilization of less pollutant energetic sources;

An example of how the opening of the market will be beneficial for new companies in the sector is that it will generate more investments in logistics. With more players competing in the market, the transport modals, mainly the maritime, will have an increase in demand – consequently, more resources to invest in their own growth.

Other examples of more practical and operational benefits are: 

• essential infrastructure used by third parties;
• facilitation of construction of new gas pipelines;
• access to transport pipelines for third parties;
• autonomy between the carrier and the trader;
• authorization for stocking product.

And, just like all areas in the market, increase competition is always a benefit for the end consumer. When consumers are given the option to choose their service provider in a wider range of alternatives, there is a natural tendency of lowering costs of inputs.

Taking into consideration all these information, we can say that, for sure, the New Law Gas is an important step for the Brazilian market, once it focus on the private participation with a public regulation for the sustainable growth of a market that was very hampered before.

And there is, for sure, demand in this Market, which was evident on the occasion of the successful auctions of the government in the recent years. This is the positon of Luís Fernando:

 “The players that are already in the Brazilian Market and several others from abroad have had an intensive participation in these auctions. Improvement measures have been taken to make it even more attractive to them.”

What is the presente stage of this Bill?

Even with all difficulties the pandemic caused in 2020, the Bill is in course, closer and closer to its sanctioning by the Federal Government.

At the moment, the text approved by the Chamber of Deputies is being analyzes by the Senate to be voted in the near future. In other words, it is very close to become a law, requiring only this last stage to overcome and, if successful, have the presidential sanction.

The expectation is that as soon as the voting is concluded, it will be put into force in stages, starting with the creation of a new regulation department, the ONGAS.

What is the prospects for the market once the law is in force?

With the new law in force, it is expected that all the chain will be positively impacted in the long term, and in a sustainable manner.

The text of the Bill itself says that the main changes will occur in the operations of outflow, treatment, processing, underground storage, conditioning, liquefaction, gasification and trading of natural gas.

When we talk about highly dependent infrastructure and logistics sectors such &G, it is important to embrace the inclusion of new players in each of these stages.

After all, an efficient production and trading chain depends on multi sectorial investments. That is what is expected in the future, i.e., that the private sector stimulates its own growth and that this takes to more jobs creation, more tax collection, besides cheaper inputs.

As Luís Fernando concludes, who works in this sector should know that “it is time to study and bend to the particulars of the sector, that will be probably one of the protagonist sectors in terms of growth in the next years. There will be a lot of opportunities of work and investment.”

The New Gas Law is about to become a reality, and those who prepare for it will be in advantage in this new scenario of competition. However, besides the gains of each company, what is to come is a very important joint work to develop even more the Brazilian O&G sector.

What about stimulating this discussion in order to contribute to the future of O&G? Share this article in the social media and take the first steps towards the discussion of this important subject!