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  • Natural Gas: a national pact that will not walk alone

    Anabal Santos Jr e Rômulo Florentino*

    Decree No. 10.712/2021 was published this Friday, which regulates the New Gas Law, sanctioned in April by the Presidency of the Republic. It is one more step much awaited by the sector towards the cheap energy shock announced by the Federal Government in 2019. To get there, however, there is still a long way to go for the National Agency for Petroleum, Natural Gas and Biofuels (ANP) to consolidate the rules to which the recent regulations provide guidelines, such as deadlines and conditions for non-discriminatory, negotiated, transparent and under adequate remuneration of interested third parties to facilities essential for the development of the natural gas market, such as flow pipelines, gas installations. LNG treatment or processing and terminals. Furthermore, the great challenge will be to ensure that all states in the federation adopt rules for local piped gas services that do not conflict with the Federal Constitution.

    This is still a distant reality. Only eight of the 27 federative units have an open market aligned with the New Gas Market. Only in the states of Amazonas, Bahia, Espírito Santo, Minas Gerais, Rio de Janeiro, Santa Catarina, Sergipe and São Paulo is the gas market, an activity that the Decree No. 10.712/2021 now leaves no more doubts that it is classified as competitive, it is not to be confused with the concession of the provision of piped gas services, or distribution, to local monopolies. Although this is good news for these states, which are better positioned to receive investments from the sector, in the national market, caution and work are still needed before celebrating.

    The decree establishes that the urgent harmonization and improvement of state standards for the natural gas industry will use as mechanisms knowledge networks coordinated by the Ministry of Mines and Energy and guidelines proposed by the ANP, whose adhesion by the states will be voluntary and registered in a National Pact for o Development of the Natural Gas Market. The Federal Government’s effort not to invade the constitutional competence of the states to regulate the distribution of natural gas is perceptible and legitimate. However, without the establishment of incentives to adhere to these best practices, the great national pact runs the risk of being even at the mercy of volunteerism. The price may be the perpetuation of an incipient market in most of Brazil.

    The new decree evolved by solving doubts about rules and exceptionalities to be considered by the ANP when classifying transport pipelines, establishing parameters for the transfer of transport capacity and clarifying the conditions in which the corporate relationship between companies that carry out activities in different links in the natural gas chain. However, it will be essential to take a closer look in the coming months for the maturing of the national pact that is being proposed. One way can be the establishment of regional coordination tables dealing with the specific needs of each state for the development of the gas market, see the successful model that has been implemented in the Oil and Gas Exploration and Production Revitalization Program Natural in Land Areas (REATE) under the coordination of the Ministry of Mines and Energy. After all, it is precisely in the provision of local piped gas services that the input reaches – or should – reach the consumer. If the market does not develop at this end of the chain, all efforts to develop public policies for the national strengthening of the industry are weakened.

    As next steps, a proactive and pedagogical journey by the Federal Government, state by state, to address the importance of harmonizing distribution rules will be essential. Independent producers and consumers, eager for all states to review their regulations now in light of best practices, will certainly be allies in this effort. If, in addition to the states’ own interests in developing their markets, which should already be sufficient to guarantee their engagement, other incentives can be established, even better. Thus, the national pact for natural gas will not just be on paper.

    *Executive Secretary and Manager of Regulation and Public Policy of the Brazilian Association of Independent Oil and Gas Producers (ABPIP)