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Why Brazil sees an LPG shortage risk after Petrobras’ divestments

Bnamericas Published: Wednesday, May 25, 2022
Why Brazil sees an LPG shortage risk after Petrobras’ divestments

Brazil’s oil and gas regulator ANP is working on a plan to avoid a risk of a liquefied petroleum gas (LPG) supply shortage as Petrobras moves forward with the sale of its refineries and associated assets.  

The main measure under consideration is that the state-run oil firm remains temporarily responsible for key LPG import infrastructure after the divestment of its Abreu e Lima refinery (Rnest) in northeast state Pernambuco, a source close to the matter told BNamericas. 

Brazil produced 5.3Mt of LPG in 2021, or 70% of domestic demand. 

The fuel was produced at 19 refineries, seven natural gas processing units and three petrochemical plants, with Petrobras accounting for 97.2% of total output. 

The company was also responsible for 97.6% of LPG imports last year. 

Suape port in Pernambuco is the main entry point for LPG imports, covering deficits in the northeast and other regions of the country. 

A Petrobras-chartered LPG tanker (pictured below), permanently moored at Suape, operates as a floating terminal, with capacity to receive 44,000t of the fuel transported by very large gas carriers. 

Last year, the tanker handled 72.4% of the country's LPG imports, while also performing storage and shipments to the Suape hub, transshipment to cabotage vessels heading to other ports and providing relief for large vessels with imported products to ports with restricted access.

The LPG destined for the Suape hub is pumped by the tanker to the LPG facilities at the Suape maritime transportation terminal, which is part of the Rnest cluster for sale. 

It is then pumped to the primary distribution bases in Ipojuca, from where the fuel is shipped by road to supply Pernambuco, Paraíba, Alagoas and Rio Grande do Norte states.

Since the LPG tanker is not part of the Rnest cluster being divested, ANP is concerned that there is no guarantee the buyer will maintain it. 

Without infrastructure assurances to receive the imported LPG, the distribution sector will not be able to meet domestic demand and, consequently, the same will happen to the retail sector, which is responsible for delivering the product to the final consumer. 

And, due to the reduced supply of LPG in the domestic market, the product may suffer a price increase.

ANP’s action plan proposes that the Suape tanker be defined as critical infrastructure for national LPG supply and that Petrobras remain responsible for its charter for at least three years after the sale of the Rnest cluster.

During this period, the new entrants will be able to provide supply alternatives, such as building and operating an onshore storage facility to replace the tanker. 

Meanwhile, since this is a continuation of the tanker charter, ANP claims there will be no increase in costs for Petrobras, which will continue to be paid for the tanker charter’s logistical services to LPG distributors (receipt, storage and shipping).

The regulator is not the only public body concerned about the issue. In a recent report, federal audit court TCU concluded that the privatization of Petrobras’ refineries may lead, in the short term, to an increase in fuel prices and a risk of shortages, with occasional difficulties in supplying the market, especially with LPG.

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