Dispute in the natural gas market between transportation companies and Petrobras "heats up"

Brasilia - A tariff review proposed by the National Petroleum Agency ( ANP ), which is expected to affect remuneration in natural gas transportation, has pitted two of the market's largest transporters against major energy consumers, primarily Petrobras . The revision of the calculation methodology has also sparked a fierce behind-the-scenes battle.

On the eve of releasing a new resolution, ANP opened a 15-day public consultation on Wednesday, June 3rd, regarding a new methodology for calculating the remuneration base for the assets of the gas transportation companies Nova Transportadora do Sudeste (NTS) and Transportadora Associada de Gás (TAG). In other words, the value of each company's gas pipeline network. Interested parties will have until June 22nd to provide contributions to the process.

In the future, the ANP (National Agency of Petroleum, Natural Gas and Biofuels) is likely to analyze the updated value of these assets and propose a new method for calculating gas transportation tariffs – which could take months. In practice, the higher the value of the assets, the higher the tariff; and the lower the value, the lower the tariff.

The two companies inherited a gas pipeline network from Petrobras itself, in the recent privatization process of the oil company's assets, in addition to contracts for gas supply. Today, they own the Southeast (NTS) and Northeast (TAG) pipeline networks. Together, they represent 65 million m³ per day of capacity for gas transportation.

The regulatory agency's decision to review the tariffs of these contracts in the future, however, has already generated a backlash from transport companies, which fear being impacted by lower tariffs going forward.

This is because the new pricing method indicated by the ANP is unprecedented in the country - the Recovered Capital Method (RCM). The RCM is adopted in Australia, but the way it is being designed for the local market may result in lower remuneration for companies, according to the transport companies.

Through the new method, the ANP (National Agency of Petroleum, Natural Gas and Biofuels) aims to determine the size of the two companies' assets and, based on this assessment, propose a higher or lower tariff for gas transportation. The transportation companies collect the tariff, and the consumer (industries, Petrobras, etc.) pays.

A source closely following the technical discussions at the ANP (National Agency of Petroleum, Natural Gas and Biofuels) analyzes that, so far, there is a feeling in the gas market that the tariff review process conducted by the regulatory agency is leading towards a model that confirms that gas pipelines would be worth less, due to the depreciation of these assets of the transport companies. And, at this moment, it would be benefiting gas users (Petrobras and industries) more.

"There's already a huge fight going on," assesses this source, who acknowledges the technical challenges of evaluating assets of this nature in a multi-billion dollar dispute of this kind.

Behind the scenes, gas companies understand that the main objective of this process will be, as a consequence, to promote some kind of tariff reduction going forward, NeoFeed has learned. There is an understanding within the industry and among consumers that the cost of natural gas is very high in the country. And that is why there is so much pressure involved in this case – from both sides.

The understanding in the market is also that the ANP (National Agency of Petroleum, Natural Gas and Biofuels) has been signaling that the assets of the transport companies have already been amortized and paid for by consumers.

ANP, in turn, said in a statement that the choice between the "valuation methods" for the assets of the transport companies (BRA) remains under technical discussion and will be subject to future deliberation by the agency's board of directors, after analysis of the contributions received. It also stated that it has been providing transparency and publicity to the process.

"This is not, at this time, a final decision on the valuation model for the Regulatory Asset Base (RAB) that will be adopted in the 2026-2030 Tariff Cycle," he clarifies.

Market versus consumers

Speaking to NeoFeed , the Association of Natural Gas Pipeline Transportation Companies (ATGás), which represents the five companies in the sector including TAG and NTS, stated that it is following with "concern" the ANP's initiative to open a public consultation on the RCM (calculation method for the asset value of the two companies).

"In a preliminary analysis of the technical notes under review, the low emphasis given to the structural investments needed for the sector is striking," the organization assesses.

The association argues that the tariff review should be conducted with technical criteria and respect for the regulatory standards of the ANP itself, "rejecting methodologies that are not widely recognized or used by the market."

"Maintaining stable and predictable rules is an indispensable premise for ensuring the necessary investments and enabling the resumption of investments in transportation, in order to bring energy security and guarantee the development of the natural gas market in Brazil."

When contacted, TAG and NTS did not respond individually.

On the other hand, the country's major natural gas consumers have been aligning themselves with the ANP's stance and agree with the new methodology proposed for calculating the asset values of transportation companies, which will be used to define future transportation tariffs.

In a statement to NeoFeed , Petrobras, which sold the two gas pipeline networks in question, said that it defends the same approach to valuing the Regulatory Asset Base (BRA) historically used by the ANP in processes of this nature, as was the case with the Brazilian Bolivia-Brazil Gas Pipeline Transport Company (TBG) in 2019.

The oil company further clarifies that its involvement in the process is "technical in nature and consistent with the calculation of the first tariff cycle, in line with the regulations of the Agency [ANP] itself."

"Regarding the historical data of the assets that make up the gas pipelines currently operated by NTS and TAG, Petrobras has maintained a stance of transparency and collaboration with the ANP, providing all the information requested by the Agency and indicating the need for the transport companies to supplement the information under their responsibility," the state-owned company reports.

Finally, Petrobras also maintained that "the historical data on these assets were part of the set of information made available to the buyers [NTS and TAG] throughout the divestment processes."

Paulo Pedrosa, president of the Brazilian Association of Large Industrial Energy Consumers and Free Consumers (Abrace), agrees with the process presented by the ANP and considers the proposed method to be "classic, safe, and appropriate." He understands that it is necessary to normalize the discussion and believes that the regulatory agency has been promoting advances required by the new Gas Law in Brazil, from 2021.

“Natural gas transportation is a regulated sector, and the concept is simple: the consumer has to pay a fair price for the asset that is serving them,” he told NeoFeed .

"The key is to determine the size of the assets, but the ANP has technical evidence to prove that this asset is extremely undervalued," he added.

According to Pedrosa, the companies that acquired the gas pipelines have already paid out significant dividends, recovered their invested capital, and secured profitability. Therefore, the asset is depreciated.

"Now the time has come for this to happen, to the benefit of consumers," he explains, noting, however, that a tariff reduction is not currently under discussion.