Progress slow on Brazil's Gas for Jobs programme [Gas in Transition]
Brazil’s government kicked off its Gas for Jobs programme last year, positioning natural gas as a driver for the country’s reindustrialisation by making the fuel more available and affordable for key sectors, particularly in industry. But progress implementing the initiative has been slow, Ieda Gomes, energy expert and a non-executive director of international companies in the energy and infrastructure sectors, tells NGW. What is more, left-wing President Ignacio Lula da Silva is looking to undo some of the positive steps taken to liberalise the natural gas market under his predecessor Jair Bolsonaro.
The Gas for Jobs programme, initiated in March 2023, involves various institutional and regulatory measures to give gas a greater role in spurring industrial activity. It can have greater application in growing strategic sectors like steel, ceramics and petrochemicals, but its use has been stunted by limited supply. The programme aims to boost domestic supply, expand the socioeconomic returns from gas development and integrate it more in the country’s energy transition strategy.
Currently only half of the gas that Brazil produces is available for the market, with the rest reinjected into wells, either to boost oil recovery or because of a lack of pipeline capacity. As a result of the shortage, domestic gas prices are typically on a par with prices for imported LNG. According to Gomes, there has been no progress in bringing some of the 25bn m3/year of gas that is currently reinjected into oilfields offshore to the market in southeast Brazil.
One of the flagship policies of the Bolsonaro administration was reform at Brazil’s national oil and gas company Petrobras. Under an agreement with the competition authority CADE, the company liberalised the energy market through the divestment of assets in gas transportation, distribution and refining. The agreement also prevented Petrobras from acquiring gas supplies from other producers, in order to dominate the market. Among the largest divestments seen, Petrobras sold its northern and southeast pipeline systems, as well as its gas distribution holding Gaspetro.
“These divestments and further regulatory improvements created a new dynamic and new products offered by the private-owned transportation companies and gas commercialisers,” Gomes says. “Unfortunately, the new government is not willing to continue and is asking for the renegotiation of the agreement with CADE.”
The government has also faced criticism for political interference in Petrobras’ management decisions. Shares in the national oil company dropped 10% in a single day earlier this month after it opted against issuing extraordinary dividends. CEO Jean Paul Prates said the decision came from Lula’s cabinet. The government wants to cut shareholder payouts so more can be invested in refineries and renewables. Reuters reported in November that Lula had asked Prates to adjust its 2024-28 investment plan to prioritise the creation of local jobs, by ordering more ships for offshore projects at Brazilian shipyards.
Another key policy development expected this year in Brazil is a new bill establishing a national programme for low-carbon hydrogen, and the creation of a steering committee to manage the programme. The bill was approved by Brazil’s Chamber of Representatives in November last year, but is awaiting a second confirmation vote by the Senate.
Natural gas supports security of energy supply in Brazil, Gomes says, given the country’s substantial use of intermittent renewables – primarily hydropower. In 2023, the country generated 93% of its power from renewable sources, as reservoir levels at hydroelectric dams were high, and as a result, natural gas power plants were not used for most of the year. On the other hand in 2021, a severe drought means hydropower reservoirs were at very low levels. Yet Brazil did not have to resort to curtailing power supply or load shedding, as gas plants were put into operation.
More recently, the heatwave caused by El Niño and climate change meant it was necessary to dispatch gas fired power plants in some regions to cope with high air conditioning load.