Brazil needed to reinject 45% of natural gas production in 2021 due to lack of transportation infrastructure

RIO DE JANEIRO, BRAZIL – Due to the water crisis, the country imports record levels of natural gas from the U.S. and Argentina, but returned nearly half of its own gas production to wells in 2021.

It is 22.2 billion cubic meters or 45% of the volume produced during the period. This is the highest figure in the historical series of the ANP (National Agency of Petroleum, Natural Gas and Biofuels).

Gas re-injection has been increasing in recent years, especially from 2019, when it increased by 10 percentage points from 35% to 45% compared to 2021.

About 85% of the natural gas produced in Brazil is associated with oil. That is, both are present in the deposits. To produce oil, companies must extract natural gas. According to the founding partner and director of CBIE Advisory, Bruno Pascon, oil companies have two options in this case: sell the natural gas or reinject it.

In countries with a similar production profile, such as Norway, Nigeria and Algeria, the rates of reinjection of natural gas are lower. They range from 20% to 35%.

“When there is a lot of gas associated with oil, the reinjection rate is naturally higher than in a situation where the gas is not associated, or in countries where the percentage of gas associated with oil is lower,” Pascon said.

One of the reasons for the reinjection of gas is to increase pressure in wells, making it easier to extract more oil. However, the main reason the percentage of gas injection in Brazil is so high is another: the lack of gas pipelines.

The country has only 9,409 kilometers of transmission and transfer pipelines, a figure far below that of the United States, Europe, and even neighboring Argentina.

These pipelines bring gas from natural gas processing units (NGPUs), where it is processed to chemical specifications, to the network of state-owned distributors responsible for the input that reaches households and industry.

“The main reason [for the high reinjection in the country is actually the bottleneck in infrastructure, the lack of flow paths, natural gas processing plants, and transportation pipelines. All these key infrastructures are necessary to get the gas to market,” says Marcelo Mendonça, director of strategy and market at Abegás (Associação Brasileira das Empresas Distribuidoras de Gás Canalizado).

EMPTYING OF PRODUCTION

Another bottleneck in Brazil’s infrastructure is the gas pipelines that transport gas from production platforms to NGPUs. In the Santos Basin, there are currently two pre-salt production pipelines: the Rota-1 and Rota-2 pipelines that connect the fields to the NGPUs of Caraguatatuba (SP) and Cabiúnas (RJ).

Since at least 2014, Petrobras has been planning the Rota 3 pipeline to expand the flow of gas production after the input supply increased.

The pipeline feeds into the Gaslub hub – the former Comperj, which was downsized after the Lava Jato operation. The pipeline, originally scheduled for July 2020, is expected to be commissioned this year.

“Due to the delay of Rota 3, we are losing R$8 (US$1.5) billion annually,” Mendonça said. This figure takes into account the loss of revenues from royalties, special participations and ICMS in the states.

Despite the forecast for operations this year, the full flow capacity of gas brought to the coast by Rota 3 and processed at Polo Gaslub’s UPGN depends on the Itaboraí-Guapimirim transmission pipeline, which will inject marketable gas into the NTS transmission gas pipeline network.

The construction of the pipeline depends on the publication of a public call for capacity leasing, in which production companies contract the transport capacity in the pipeline.

Speaking to the Poder360 newspaper, NTS said that the launch of the public tender is planned for the second half of 2022 and that the pipeline is expected to be operational in the first six months of 2023.

If Brazil could divert all the gas that is reinjected [due to lack of infrastructure], it could reduce this reinjection to 30 to 35% – not 45 to 50%, as is the case today – which would correspond to a net additional production of 21.6 million cubic meters of gas per day.

The state-owned EPE (Energy Research Company) projects that three new gas pipelines will need to be built by 2031 to accompany the growth in net natural gas production, which will reach 136.2 million cubic meters per day, up from 63.9 million in 2021. Here is the full study (953 KB).