Petrobras improves proposal for gas sale, but still displeases the market

Petrobras has improved its proposal for new natural gas supply contracts, but the terms are still displeasing to piped gas distributors, who see a “strong impact on the market” in a scenario of slow economic recovery.

The new proposal for long-term contracts foresees a 50% readjustment in 2022, half of the percentage foreseen in the previous proposal. Short-term contracts, which can raise the price up to three times, have not changed.

Contracts that represent around 70% of national gas consumption will expire at the end of 2021. Some distributors have been making public calls for private suppliers, but Petrobras still tends to have an important weight in the sector for the next few years.

In a statement, Abegás (Brazilian Association of Pipeline Gas Distributors) says that “although it establishes flexible conditions, the new proposal still generates a strong impact on the market, which lives with a scenario of economic recovery below the expected pace”.

“In addition, the market still faces barriers to an effective opening, which has been affecting the conditions of price competitiveness of the molecule”, continues the entity, saying that measures are still lacking to allow other suppliers to access the processing and transport infrastructure of the fuel.

Abegás even went to Cade (Administrative Council for Economic Defense) to denounce “anti-competitive conduct” by Petrobras. The new proposal by the state-owned company was made after the complaint.

Petrobras says that it has less gas available today because it was prohibited from buying its partners’ share of production projects. Thus, it will need to import the product, whose international quotation soared in 2021.

This Tuesday (30), at an event with analysts in New York, the company’s management stated that its strategy is to favor long-term contracts in order to have more security in the destination of the gas it produces in the pre-salt.

According to Abegás, the terms offered by the state-owned company indicate a reduction in prices throughout the contract, “depending on the price of oil and the dollar and, mainly, on the real competition in the offer of the molecule by other suppliers”.

The progress of the negotiations indicates that the government’s promise to promote a cheap energy shock with the opening of the natural gas market during this term of President Jair Bolsonaro (no party) will not be fulfilled.

The promise was one of the first banners of Economy Minister Paulo Guedes, and resulted in the approval of the new Gas Law, sanctioned by Bolsonaro in April.