The price of imported LNG is skyrocketing, forcing Brazil to hurry up fuel initiatives

Sao Paulo Liquefied pure fuel (LNG) import prices to Brazil have risen by greater than 85% this yr, pushed by increased worldwide costs as a result of European power disaster, though the quantity of fuel required for thermal energy crops has elevated. decreased considerably.

Analysts say the tightening within the worldwide fuel market, set to final within the coming years, raises the danger of Brazil’s reliance on LNG imports, in addition to exposing the nation’s problem in tapping into its plentiful fuel provides resulting from a scarcity of infrastructure.


Information from consultancy Wooden Mackenzie exhibits that Brazil’s LNG import prices totaled $2.99 ​​billion between January and August 2022, greater than the full of $1.60 billion confirmed for a similar interval in 2021. .

This improve is as a result of latest sharp improve in fuel costs, primarily as a result of power disaster in Europe, within the wake of a discount in fuel provides from Russia.

The rise in costs coincides with a drop in LNG imports by Brazil this yr, averaging 15 million cubic meters per day between January and August, in comparison with 22 million cubic meters per day in the identical interval in 2021, in response to the information. , Wooden Mackenzie.

“The issue is that Brazil is uncovered to identify costs, which presently replicate spot costs in Europe… At the moment (costs) are in extra of $50.60 per MMBtu, which is 10 instances greater than at first of the yr. final yr,” explains Mauro Chavez, Head of European Fuel Market Analysis at Wooden Mackenzie.

A survey by consultancy Fuel Vitality exhibits that the start-up of thermal energy crops – Brazil’s principal LNG client – has fallen sharply since March, when the federal government determined to droop the so-called “diversion” triggered final yr amid a extreme water disaster.

Brazil’s demand for energy from thermal energy crops has declined considerably this yr because the monsoon introduced favorable rains that helped elevate ranges of hydroelectric storage, the nation’s principal supply of electrical energy.

Electrical system operator ONS estimates that by the top of September, Brazil could have 49.4% hydroelectric capability within the Southeast/Midwest. In September final yr, the extent reached 15%.

In Brazil, a number of LNG thermal crops are nonetheless linked, which function inflexibly, continually activated by ONS, explains Luis Barroso, president of consulting firm PSR.

“Brazil is in a significantly better state of affairs right now (than it was in 2021), a full reservoir provides us a lung so we do not have to show these thermals on. And that places a really huge duty on the ONS to correctly handle this water provide,” Barroso mentioned.

Elevated danger of dependancy

The situation of elevated demand for fuel and redistribution of provides to Europe ought to result in elevated competitors for Brazilian fuel from america, a serious world producer and the biggest provider to the Brazilian market.

Bruno Pascon, director of the Brazilian Infrastructure Middle (CBIE), says reference spot costs in Europe are extra engaging to LNG suppliers than reference costs within the Brazilian market.

“We’ll not depend on the US, the typical LNG worth for Brazil was 32 US {dollars}, which is half the promoting worth for Europe, it’s clear that the US will desire the historic associate that’s Europe, to the detriment of Brazil and South America,” estimates Pascon.

Fuel Vitality CEO Rivaldo Moreira Neto says perceptions of the danger related to Brazil’s dependence on imports have intensified because the world has lengthy regarded LNG as a extremely sought-after gasoline.

“If we don’t have a good wet interval (for hydroelectric crops) … we must compete for this LNG with the European and Asian markets, and on the provision aspect there may be not a lot improvement.”

The specialists be aware that on this new situation, america has signed long-term contracts with European international locations, that are needed as a way to make investments in new LNG capability viable. Within the case of Brazil, the contracts concluded are normally short-term.

You will need to them that Brazil transfer ahead with fuel circulation infrastructure initiatives to cut back effectively re-injection charges and benefit from the rise in manufacturing that can come from the pre-salt layer.

“Brazil might present itself with pure fuel at a a lot cheaper price than imports… If we don’t resolve the bottlenecks we’ve and construct circulation routes, we’ll proceed to waste fuel, which is of very strategic significance,” Pascon mentioned.

Brazil’s internet pure fuel manufacturing is predicted to extend from 64 million cubic meters per day to 136 million in 2031, with an acceleration from 2026 onwards, in response to state EPE, as a result of expectation of great manufacturing from post-salt fields. the SEAL basin layer (Sergipe Alagoas) and the subsalt layer within the Campos and Santos basins.

The CBIE director highlights the delay within the commissioning of Route 3, the Petrobras pipeline, which is able to pump fuel from the subsalt layer of the Santos Basin, with a capability of about 18 million cubic meters per day.

“EPE is already evaluating a minimum of three extra pre-salt gas-only routes by the top of the last decade. Nevertheless it takes time… so we must always already be transferring ahead with these initiatives,” he mentioned.

On the demand aspect, he says main fuel provide sectors have moved ahead because of initiatives, citing the 8 GW thermal energy crops supplied for within the Eletrobras privatization legislation and the federal government’s latest fertilizer plan.

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