The New Brazilian Gas Law: opportunities for international investors

On 8 April 2021, Brazilian President Jair Bolsonaro gave his approval to the text of the New Gas Law (Law nº 14.134/ 2021), which will now regulate the sector in Brazil and promote opportunities for natural gas and LNG players.

The idea behind the new legislation is to promote competition amongst market players and improve efficiency in the gas sector.

New Rules

Amongst the changes introduced by the New Gas Law, we highlight the following:

• The promotion of integration between the gas sector and the electricity and industrial sectors.
• The establishment of ‘authorization’ as the granting regime for new gas activities, which is less complex than the concession bidding regime provided for under the previous Brazilian Gas Law (Law n. 11,909/09). The 'authorization' regime does not require a full bidding process, being more dynamic than the concession regime.
• The prohibition on gas transporters of having direct or indirect corporate control or an affiliate relationship with E&P companies and/or consortiums. The aim of this provision is to create a competitive market, with opportunities for new players in the gas sector (ending Petrobras' dominance).

Opportunities for international players

Brazil currently has one of the highest gas prices in the international gas market. With the enactment of the New Gas Law, the Brazilian Ministry of Economy estimates that domestic gas prices could decrease by 40% in the next few years, following the reforms in the sector. This will likely boost competition.

In addition to promoting competition, experts believe that the new regulations will stimulate the use of intermittent renewable energy generation and increase the deliverability of LNG and natural gas as an attractive transition fuel to complement the growing market in renewable energy sources (which are becoming increasingly important in Brazil).

Experts have also stated that Brazil is set to become a new hub of demand for LNG in Latin America over the next decade, with opportunities arising for international players.

For further guidance on the new Brazilian Gas Law, please do not hesitate to contact Denise Medeiros, Patrick Carvalho or Stirling Leech in the Sao Paulo office.