Insight
Why is Petrobras increasing its gas prices in Brazil?
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Report summary
On 1 January 2022, 22.5 Mcmd of demand from local gas distribution companies (LDCs) will be uncontracted, as some of their contracts with Petrobras expire. LDCs saw this as an opportunity to sign GSAs with third parties at better price conditions compared to the current Petrobras gas supply contracts. However, with the emergency power auction that provided record-high electricity prices, a few gas producers avoided having to negotiate with LDCs, as the winning thermal power projects will pay higher prices until December 2025 than the current market prices with industries and LDCs. As a result, to secure gas supply in 2022, LDCs have to rely again on Petrobras. To improve its financial results, the Brazilian NOC intends to reflect the expensive LNG prices in its new GSAs. But does Petrobras really need to charge LDCs LNG parity to avoid financial losses?
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