Ministry sends long-awaited natgas bill to congress

Friday, March 10, 2006

Brazil's mines and energy ministry finally submitted to congress on Wednesday a long-awaited bill to regulate the natural gas market considered essential to develop the domestic gas market to meet growing demand, the mines and energy ministry said in a statement.

The 10-page bill sets rules for awarding 35-year concessions for new gas transport pipelines for free access to existing pipelines by different companies throughout the country and determines how transport costs for the fuel should be determined, the ministry said.

While the bill says the expansion of the gas transport network in Brazil will be planned by the ministry, hydrocarbons regulator ANP will be responsible for holding public tenders for new gas pipelines according to demand.

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The bill also proposes a period of 10 years of exclusive operation of new pipeline projects and projects currently under construction before the builder has to offer free access to the pipeline to other companies.

Additionally the government would assume control of the pipelines after the end of the 35-year concession period if the concession is neither extended nor transferred to another operator.

The bill determines that companies offering the lowest annual revenue from the pipeline's operation will win ANP tenders for new pipelines. The revenue will be used by companies to determine the transport rates and operational costs they will charge clients.

The new bill also creates a secondary market for natural gas, allowing buyers of gas from transport or distribution companies to resell the gas they bought and did not use.

Also the new bill determines that tenders for gas exploration, liquefaction or industrialization into other forms must be authorized by ANP.

New regulations for the country's natural gas pipeline transport system are considered essential by the government to increase investments to expand the country's existing 5,688km natural gas transport network and meet growing demand for gas, which could top 100 million cubic meters a day (Mm3/d) in 2010 from current levels of 40Mm3/d.

According to mines and energy minister Silas Rondeau, natural gas transport in Brazil is currently controlled through the 1997 general hydrocarbons law, which is a good bill for the production and transport of oil but not so good for natural gas, the statement said.

"The current regulations have been inefficient in promoting the development of the potential of the natural gas industry," Rondeau said, pointing out that while the oil market is mature, the gas market is developing in Brazil.


A conflicting bill proposed by the opposition senator Rodolpho Tourinho, is already being debated in congress.

Tourinho's proposal would create a gas market regulator to oversee the operation of the gas pipeline network and give ANP more power for strategic planning. However, it does not give any timeframe for exclusive operations of new lines, allowing private companies to assume control of existing pipelines operated by federal energy company Petrobras (NYSE: PBR).

The government's bill is much more in line with Petrobras' stance but before sending the bill to congress, the energy and mines ministry signaled it would be willing to combine the main points of the two bills.

In any case, while Tourinho's bill, which has support from strong industrial groups and the association of natural gas distributors in the country (Abegás), is going through senate committees the government's version has yet to start its passage through the approval proceedings.

While government allies in the senate have all but blocked approval of Tourinho's bill, the government has not labeled its own bill as urgent, which would prioritize it ahead of other bills in congress.