Brazil to Give Regulator More Control Over Natural Gas Projects
(Bloomberg) -- Brazil’s government is preparing a decree to give the nation’s oil regulator greater control over how producers operate natural gas projects in an effort to increase supplies and reduce prices for consumers, according to a draft reviewed by Bloomberg.
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The decree, which could go through alterations before it is published, would allow the Brazilian National Agency for Petroleum, Natural Gas and Biofuels to limit the amount of gas that oil producers reinject into reservoirs and set how much gas projects should be producing, according to the document.
Mines and Energy Minister Alexandre Silveira said the government in talks with the industry to boost supplies of the fuel and that the upcoming decree would not be an intervention in the natural-gas market. He confirmed the document would give the regulator more control over gas reinjection levels but also said changes would not be made retroactively to existing projects where investments have been made.
“We have to look for the international average of re-injection,” Silveira said at a news conference on Monday in Brasilia. “Gas is a public policy.”
The administration of Luiz Inacio Lula da Silva is prioritizing efforts to increase supplies of natural gas and bring down prices as a way to boost industrial activity. But having the regulator review how much natural gas oil producers reinject into offshore fields — a process that increases underground pressure and can help stimulate the production of oil — could make oil companies more cautious.
“No one but the operators themselves understand the needs of their project. A regulation of this nature gets to the heart of the investor’s decision and brings new risks to the sector,” said Rivaldo Moreira Neto, a director at consultancy A&M Infra.
The draft decree allows the agency to review the development plans at oil and gas concessions, including those already in operation. It says the government can transfer the concession rights to other operators in cases of non compliance. The plan also mentions the use of a natural gas production hubs that would be shared between several fields to make use of available processing capacity.
The regulator could also limit natural gas exports when those shipments are identified as a risk for domestic supply, according to the draft.
Petroleo Brasileiro SA is Brazil’s dominant oil and gas producer. International oil companies including Equinor ASA and Shell Plc are developing offshore oil projects that have large volumes of associated gas.
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