Brazil hits record in gas purchases from U.S. after water crisis

RIO DE JANEIRO, BRAZIL – The water crisis has caused Brazil to buy record volumes of gas from the United States, with the country moving from seventh place in the ranking of the largest importers of American liquefied natural gas (LNG) in 2020 to fourth this year.

Analysts say that LNG imports, which account for nearly a quarter of Brazil’s gas supply today, more than doubled last year and should remain high in the medium term.

Last year Brazil imported 3.29 billion cubic meters (m3) of LNG, for which it paid US$677.24 million, according to data from Global Trade Tracker, compiled by the consultancy Wood Mackenzie. This year, from January to September, the country bought 7.19 billion m3 of LNG, at US$1.85 billion.

Today liquefied gas from the USA accounts for 90% of the total volume of LNG imported by Brazil. In 2020, Brazil imported almost 160 million m3 from Trinidad and Tobago, 93.87 million m3 from Angola, and 3.03 billion m3 from the USA.

This year to September, it bought 252.68 million m3 from Trinidad and Tobago, 136.59 million m3 from Angola, 6.50 billion m3 from the USA, and another 307.21 million m3 from Qatar.

Brazil imports LNG from Argentina sporadically to supply the Uruguaiana Thermoelectric Plant, but that can go months without being dispatched.

“The main reason why Brazil buys much more gas from the U.S. today is the water crisis. There was a very large thermoelectric dispatch that had to be supplied by additional gas volumes,” says Henrique Anjos, LNG gas sector analyst for Latin America at Wood Mackenzie.

“In addition, the reduction of the contract with Bolivia cut by one-third the supply of Bolivian gas, which for years was Petrobras’ main source to cover swings in domestic demand. Now Brazil imports all it can from Bolivia and supplies what it lacks with LNG.”

Data from the November trade balance, released yesterday by the Ministry of Economy, show that in the year-to-date, natural gas imports, liquefied or not, increased 273.6% in values, compared to 2020.

According to the latest Monthly Bulletin of Natural Gas Industry Monitoring, from the Ministry of Mines and Energy, from August, domestic production now accounts for 55.12% of Brazil’s natural gas supply today, while gas imports – including LNG – account for 44.87%.

In 2019, LNG accounted for 9.91% of the total supply. It moved to 10.91% in 2020 and is now at 23.72%.

LNG imports have soared due to the need to activate more thermal plants because of the hydro crisis and less gas imported from Bolivia.

The average supply of imported gas, according to the MME, went from 26.26 million m3 / day last year to 42.38 million m3 this year – peaking at 54.50 million m3 in July and 51.81 million m3 in August.

While the average gas coming from Bolivia went from 17.88 million m3 /day in 2020 to 19.96 million m3 /day in 2021, the average regasification of imported LNG went from 8.38 million m3 /day in 2020 to 22.41 million m3 /day in 2021.

The problem is that the price of LNG is more than triple that imported from Bolivia or produced here, says Anjos. The LNG leaving the U.S. costs US$ 9.68 per million BTU. Adding the value of freight and the cost of regasification, it can reach US$ 16.7/million BTU.

Domestically produced gas costs between US$3.5 and US$4/million BTU, says Anjos. And the gas that comes from Bolivia costs US$5.7/million BTU when it reaches Mato Grosso, at the border.

“Even if Brazil wanted to buy the 30 million m3/day from Bolivia again, as it was in the previous contract, it would have difficulty because gas production in the neighboring country has been falling. We estimate it to be around 44 million m3 /day today, compared to an average of 52.9 million m3 /day in 2018,” says Anjos.

Among the reasons behind the significant increase in gas imports from the U.S. are the greater availability of shipments in the spot market (short-term) and the fact that the U.S. terminals are located on the Atlantic Ocean, facilitating transportation here.

Brazil currently has four regasification plants, three of which belong to Petrobras. One in the Guanabara Bay, in Rio de Janeiro, another in the Bay of All Saints, in Bahia, and another in Pecém, in Ceará. The fourth plant belongs to the New Fortress Energy company in Sergipe.

In early November, the National Petroleum Agency (ANP) authorized the construction of the Gas Sul Terminal in the Babitonga Bay, in Santa Catarina. The terminal will have a regasification plant and should be ready by next year.