Petrobras offers to peg gas contracts to Henry Hub

Brazilian energy company Petrobras said May 3 its natural gas customers can expect new contractual models indexed to US benchmark Henry Hub prices.

“The company will offer, in addition to the existing models, indexed to Brent oil price, a pricing alternative with less volatility, without giving up the alignment with international prices,” the company said. “The new model will be indexed to Henry Hub prices, a widely used reference that serves as a benchmark for new liquefaction projects in the USA.”

The company, known formally as Petroleo Brasileiro, said it began investigating new contractual models two years ago, saying the diverse options were part of opening up the Brazilian natural gas market to more competition.

Apart from that, Petrobras said it would offer more variety in its contractual terms, giving customers term options from six months to as long as four years.

“The portfolio of products offered will allow customers to match consumption seasonality and meet occasional opportunities for a shorter term (products of six months or one year) and contract base products for a slightly longer term, with greater stability of consumption,” the statement read.

The price for Brent, based on a basket of crude oils pulled from the North Sea, serves as the global benchmark for the price of oil. Henry Hub is the futures price for natural gas traded on the New York Mercantile Exchange.

Petrobras touted Henry Hub for its transparency and emerging importance as the reference price for long-term trade agreements for LNG sourced from the US.

“The new formula will still be negotiated with customers and will not necessarily imply material impacts on prices,” the company explained. “In addition, there will be no changes in the transportation portion of the gas price.”

Total sales for Petrobras in Q1 2021 were lower than Q4 2020, but some 2.3% higher than in Q1 2020, due in part to an increase in diesel sales.