Brazil’s Lower House May Vote to End Petrobras’ Virtual Monopoly in Gas Industry

RIO DE JANEIRO, BRAZIL – Brazil’s lower house is set to vote on Tuesday, September 1st, to pass a bill that can further open up the natural gas market to private investors by breaking the monopoly held by state-controlled oil company Petrobras.

If approved, the law could reduce natural gas prices in Brazil, says Congressman Laercio Oliveira, who will present the bill in the House. Its backers say the law could attract R$60 billion (US$11 billion) in private investments and generate 4 million jobs.

Oliveira said he expects the bill to be approved without changes in the Lower House. The bill would still need to be sent to the Senate for approval and then signed into law by the President (if not vetoed).

Petrobras lost its monopoly in the oil and gas sector by constitutional amendment more than two decades ago, but in practice has kept a virtual monopoly in the natural gas industry.

The company started to scale back control a couple of years ago, by selling assets including thousands of miles of pipelines.

The reduction of Petrobras’s control over the industry now depends on passage of legislation to allow more private companies enter the sector.

“We have the most expensive gas in the world and, which forced hundreds of industries to shut down in Brazil or change their source of energy,” the legislator told Reuters, saying natural gas costs more than twice in Brazil than in the international market.

The bill aims to reduce bureaucracy in handling concessions and building pipelines, with only one authorization needed from the Brazilian oil and gas industry regulator known as ANP.

Last week, Petrobras and Golar Power chiefs criticized some last-minute attempts to change the proposal that would be presented in the House. Petrobras CEO Roberto Castello Branco said there were private groups interested in building pipelines subsidized by governments.

“That would be a terrible idea and bad use of taxpayer’s money,” he said on Friday.

The bill would also open competition by changing the structure of the gas sector so producers cannot be distributors and vice-versa, Oliveira said.

Petrobras has shut down two fertilizer plants in recent years that ran on natural gas, he said. Exports from the units would be more competitive if gas prices were lower, he said.

Economy Minister Paulo Guedes also likes the bill that was first proposed in 2013 because it will increase federal tax revenues, Oliveira said.

Source: Reuters