New Gas Law leads Brazil toward what is practiced in the world market

The New Gas Law takes Brazil toward what is practiced in developed countries, says the lawyer Marcus Pessanha, an administrative and regulatory law specialist.

“It certainly goes in the direction of what is expected by the world market; it goes in the direction of what is practiced outside of Brazil, even though we have not yet felt the return of this in marketing terms,” he highlights.

The new legislation was approved in May 2021 to open the sector’s market in Brazil and make it more competitive since Petrobras still dominates the industry.

After almost seven years in the Legislative, Law 14,134 has as its main changes the alteration from the concession regime to the authorization regime, the new tariff rules, and the access of third parties to gas pipelines, natural gas treatment and processing units, and Liquefied Natural Gas (LNG) terminals.

The natural gas tariff in Brazil is one of the highest in the world and represents an obstacle to the competitiveness of the national economy.

According to the National Confederation of Industry (CNI), in 2021, the price for the industrial sector averaged US$14 per million BTU (British thermal unit), more than three times the amount charged in the United States and twice as much as in European countries.

Although Pessanha recognizes that the road to feeling the effects of the new regulatory framework is long, the lawyer highlights that the law’s approval guarantees legal security to attract investors.

“It certainly adds more legal security to the gas segment since the necessary changes for us to have more flexibility and a greater contribution of resources from investors will be made precisely by law, not by normative acts, regulations, and decrees,” he concludes.

The federal government estimates that the new law will directly reduce the existing bureaucracy for constructing pipelines, which are pipes used to transport natural gas.

Consequently, it is expected to reduce transportation costs, create jobs, and attract investments.

GOVERNMENT EXPECTS HIGH INVESTMENTS

The new regulatory framework expects to attract capital in the order of R$74 billion and generate about 33,000 new jobs in ten years, according to a survey by the Ministry of Mines and Energy (MME).

For Taciana Salera Alves, a lawyer specializing in External Control of Public Administration and with a master’s degree in Economics, the opening of the gas market in Brazil will directly impact the final price, both for the end consumer and for the industries.

“The law came with the main purpose of attracting new investments, guaranteeing the opening of the natural gas market in Brazil and, with this, faced with a greater supply of the product, reduce the price for consumers. Today, we have, perhaps, a repressed demand for this fuel because of its high value,” assesses Alves.

With information from Brasil61

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