On April 8, 2021, Brazilian President Jair Bolsonaro gave his approval to the text of the new gas law.
The law lays the groundwork for the development of a competitive LNG market that will allow for new investments in the industry, lower costs and higher gas consumption.
Brazil’s new gas law marks an important step towards an open, competitive and future-ready gas market.
A new regulation
The new gas law provides the legal framework for the transition from a vertically integrated market structure to a liberalized and competitive market structure, based on four key principles :
The objective of these measures is to create a competitive market, with opportunities for new players in the gas sector.
Opportunities for international players
Brazil currently has one of the highest gas prices in the international market. With the enactment of the new gas law, the Brazilian Ministry of Economy estimates that prices could drop by 40% in the next few years. This price reduction will stimulate competition.
Indeed, it should promote the development of a more dynamic gas market, with cheaper gas allowing large industries that use coal or other polluting fuels to migrate to natural gas, encouraging the expansion of the pipeline network.
In addition, this price decrease will probably attract a lot of foreign investment in the Brazilian LNG and natural gas market.
In addition to fostering competition among market players and improving efficiency, the new gas market reform program is expected to facilitate the integration of a larger share of intermittent renewables into the Brazilian energy system. According to Brazil’s Energy Expansion Plan 2029, the share of intermittent renewables in the country’s electricity mix is expected to reach 20 percent by 2030.
With this new regulation, Brazil tends to become a new hub for LNG demand in Latin America over the next decade, with many opportunities for international players.
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