Brazilian new gas market: challenges & opportunities

Abstract

This article presents the bases of the regulatory reform in the Brazilian natural gas sector. The core of this reform was to move from a governance regime based on the operation of a state monopolist, Petrobras, to one of free competition. The main instruments used have been the unbundling of the transport activities, piped gas distribution and the strengthening of access to essential infrastructures. After more than twenty years from the market opening in 1990s second half and the elaboration of a regulatory framework for the sector in 2009, the Brazilian government found that stronger measures would be needed to achieve this goal. Hence, after summarizing discussions on the new reform of the gas sector in 2016 with Gas to Grow, the Brazilian government was able to take important steps with the New Gas Market Program: (i) the National Energy Policy Council issued relevant guidelines that were key for formation; (ii) Petrobras signed a Cease-and-Desist Settlement Agreement (TCC) with the Administrative Council for the Economic Defense (Cade), aiming to reduce the company's market power; (iii) Petrobras has completed the sale of two important natural gas transportation companies; (iv) the New Gas Law was approved by the House of Representatives; (v) the Government Executive Power regulated this law in Decree; and (vi) the sectorial regulatory Agency has established a complete regulatory review agenda to implement the new legal framework and it is attentive to market changes. The reform of the Brazilian gas sector based on the competition metric is similar to that which occurred in other countries, having incorporated much of their experience. So helping it to overcome the difficulties that were and continue to be observed in its implementation worldwide.