On October 11, 2016, Ordinance of the Ministry of Mines and Energy (“MME”) No. 490 was published for public consultation. The ordinance included a document entitled “Strategic Guidelines for the Design of a New Natural Gas Market in Brazil” aimed at improving the basis for the new natural gas market, with a variety of players, liquidity, competitiveness, access to information and good practice.
The new guidelines are under discussion as part of the initiative “Gas to Grow”, under the coordination of the MME, together with the Energy Research Company (EPE) and the National Petroleum, Natural Gas and Biofuels Agency (ANP).
This initiative is a result of Petrobras’ current divestiture policy in the natural gas and power businesses, which will allow for the entrance of new investors and an effective opening of the natural gas market, as intended since the implementation of Law No. 11,909, dated March 4, 2009 (“Gas Law”), regulated by Decree No. 7,382, dated December 2, 2010 (“Gas Decree”).
There are ten main aspects to be discussed by the public and private agents: (i) commercialization of natural gas; (ii) entry and exit fees; (iii) essential facilities sharing; (iv) State and Federal law harmonization; (v) a natural gas demand development incentive; (vi) power and natural gas industry coordination; (vii) the independent and integrated management of transportation systems and storage facilities; (viii) the natural gas commercialization policy of the Federal Government’s share in production sharing agreements; (ix) tax challenges; and (x) support in negotiations for contracting of Bolivian gas and/or other alternatives.
Among the proposed strategic guidelines, we would like to point out (i) the promotion of commercial and operational independence of transporters; (ii) reinforcement of separation between carriers and transporters; (iii) creation of a secondary gas market; (iv) regulation of free access to gas flow pipelines, gas processing units and regasification terminals; (v) adoption of best regulatory practices in a harmonization between federal law and state regulatory frameworks; (vi) review of the transfer of power penalties to the gas suppliers; (vii) continuous operation of gas thermo power plants in the power matrix; and (viii) the transition to a new model with preservation of legal certainty and maintenance of existing contracts.
The contributions must be submitted by interested parties before November 7, 2016.
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Observations in this update about Brazilian law are by Tauil & Chequer Advogados and are not intended to provide legal advice. Any entity considering the possibility of a transaction must seek advice tailored to its particular circumstances.