Brazil gas and power long-term outlook H1 2020

Brazil’s future gas demand has changed, and Covid-19 is not the only cause. Solar distributed generation and lower electricity demand for LDCs has reduced the chances for thermal power auctions to contract existing and new thermal power plants under conventional mechanisms. At the same time, the oversupply in the power market and off-the-grid inflexible LNG-to-power projects of recent auctions pose challenges for presalt gas monetization in the integrated transport grid. Nevertheless, firm demand growth from local distribution companies and major industrial projects is still strong. In parallel, the governmental ‘Novo Mercado de gas’ regulatory schedule suffered delays limiting the opportunity for new gas supply agreements in the short term. At the same time, a new gas law is about to be voted in the Brazilian Congress, promising to unlock gas infrastructure access for third parties.