Energy: Brasília
Key Facts
—Decision. Brazil’s National Energy Policy Council (CNPE) approved a resolution authorizing direct sales of the Union’s (União) natural gas on the free market, a step to liberalize the sector.
—Mechanism. State-owned Pré-Sal Petróleo S.A. (PPSA) will commercialize the gas through auctions: short-term rounds between 2026 and 2030 and long-term contracts from 2030.
—Priority. Basic industry — fertilizers, steel and chemicals — receives priority access to the volumes on offer.
—Price. The Ministry of Mines and Energy estimates the change could cut the price of gas for industry by more than 50%.
—Timing. The first auction is expected in the final two months of 2026.
In a move to open Brazil’s natural gas market, the CNPE authorized direct sales of the Union’s natural gas through competitive auctions, aiming to widen supply and lower prices for heavy industry.
What the CNPE Decided
Brazil’s National Energy Policy Council (CNPE) cleared guidelines allowing the Union’s share of natural gas to be sold directly on the open market, the government confirmed on July 30. Until now, that gas has been sold at the wellhead to Petrobras.
The Union receives natural gas as payment in kind under the country’s pre-salt production-sharing contracts. The new rule hands the job of commercializing those volumes to Pré-Sal Petróleo S.A. (PPSA), the state company linked to the Ministry of Mines and Energy.
Officials framed the decision as a structural change to how public gas reaches buyers, part of a broader push to make the market more competitive following the 2021 New Gas Law.
To understand why this matters, it helps to know what “payment in kind” means in Brazil’s pre-salt framework. Under production-sharing contracts, the government does not collect all its revenue in cash. Instead, it takes a physical share of the oil and gas produced. That gas belongs to the Union — essentially the Brazilian federal state — and until this resolution it was sold almost exclusively to Petrobras, the dominant state-controlled oil and gas company. By redirecting those molecules to an auction system, the CNPE is separating the role of resource owner from that of dominant buyer, a distinction that market reformers have long argued is essential for genuine competition.
How the Auctions Will Work
The resolution sets out a phased calendar. Short-term auctions are planned between 2026 and 2030, while longer-term supply contracts are due to start from 2030, according to the guidelines.
The president of PPSA said the first auction should take place in the last two months of 2026. The company currently sells its gas to Petrobras, so routing volumes to a wider pool of buyers marks a departure from the status quo.
By auctioning the gas rather than negotiating bilaterally, the government intends to create a transparent price reference and give industrial consumers a new, non-Petrobras source of supply.
The two-phase design is deliberate. Short-term auctions let the market test appetite and build trading experience without locking anyone into decades-long commitments. Long-term contracts, starting from 2030, are meant to give large industrial buyers the supply certainty they need to justify investment in plants and equipment. This sequencing mirrors how other countries have opened their gas markets: first build liquidity, then offer stability.
Why Prices Could Fall
The Ministry of Mines and Energy estimates the measure could reduce the price of gas for industry by more than 50%, a figure cited by officials and industry groups after the vote.
Brazilian industry has long complained that natural gas costs more at home than for competitors abroad, weighing on energy-intensive sectors. Cheaper feedstock would lower production costs and, supporters argue, improve competitiveness.
The projected saving is an estimate, not a guaranteed outcome; final prices will depend on auction demand, transport tariffs and how much volume the Union ultimately brings to market.
Brazil’s gas price problem has deep roots. The country produces significant volumes of natural gas, much of it from the prolific pre-salt fields far offshore. But getting that gas to factories requires an expensive chain of pipelines, processing plants and distribution networks, and those networks have historically been controlled by a single player. Even when the molecule itself is cheap, the cost of moving it can keep the final price high. The government’s bet is that auctioning Union gas will inject competition at the wholesale level, but the transport and distribution bottlenecks are a separate challenge that the resolution does not directly address.
Who Gets Priority
The resolution prioritizes so-called basic industry, singling out the fertilizer, steel and chemical sectors. These are large, continuous gas users for which the input is both fuel and raw material.
The Federation of Industries of Minas Gerais (Fiemg) called direct sales of the Union’s gas on the free market an advance for industry, reflecting broad manufacturer support for the change.
For the fertilizer sector in particular, cheaper gas could ease Brazil’s heavy dependence on imported nutrients, a strategic concern for an economy anchored by agribusiness.
The focus on basic industry is not accidental. Fertilizer plants use natural gas as the primary feedstock to produce ammonia, the building block of nitrogen-based fertilizers. Steel mills use it as a reducing agent and heat source. Chemical plants crack gas molecules to make everything from plastics to solvents. These sectors cannot easily switch to alternative fuels, so their competitiveness is tightly linked to the gas price. By giving them priority access, the government is signaling that the policy is as much about industrial strategy as it is about energy market design.
What Comes Next
Attention now turns to the design of the first auction, expected before year-end, and to how PPSA prices and allocates the gas. Market participants will watch volumes, contract terms and transport arrangements closely.
Questions remain over how the new supply interacts with Petrobras, still dominant across production, transport and distribution, and whether independent buyers can secure pipeline access on competitive terms.
If the rounds succeed, the government hopes they will anchor a more liquid, competitive gas market. If volumes disappoint, the promised price relief may prove harder to deliver than the headline estimate suggests.
Several open questions will shape whether the policy delivers on its promise. One is volume: how much Union gas will actually be available for auction each year, and will it be enough to shift the market balance? Another is infrastructure access: can winning bidders book capacity on existing pipelines and processing plants on fair terms, or will incumbency advantages persist? A third is demand: will industrial buyers, especially those accustomed to long-term Petrobras supply, be willing to switch to a new, auction-based source? The answers will emerge only as the first rounds unfold and as regulators, PPSA and market players test the new framework in practice.
Frequently Asked Questions
What did Brazil’s CNPE authorize?
The CNPE approved a resolution allowing direct sales of the Union’s natural gas on the free market through auctions run by Pré-Sal Petróleo S.A. (PPSA), rather than selling the gas only to Petrobras at the wellhead.
When will the first gas auction happen?
According to PPSA, the first auction is expected in the final two months of 2026, with short-term rounds planned through 2030 and long-term contracts from 2030.
Why could the change lower gas prices?
The Ministry of Mines and Energy estimates the measure could cut gas prices for industry by more than 50% by adding a new, non-Petrobras source of supply and creating a transparent auction-based price reference.
Sources
Poder360 · eixos · Brasil 247 · O Tempo
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Sources: Poder360; eixos; Brasil 247; O Tempo.
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