Brazil gas market warming to spot trades

Brazil gas market warming to spot trades

Sao Paulo, 4 April (Argus) — Relatively low demand in the first quarter has allowed participants in Brazil's nascent open natural gas market to begin pursuing spot gas trading opportunities.

Argus heard from two participants that spot trades for small volumes have begun —transactions aimed at complementing contractual supply needs or even skirting higher-priced gas balancing needs at pipelines.

After a late-2021 sprint to tidy up the midstream sector to allow for the first contracts in the newly liberalized Brazilian gas market, spot trading emerged in late February and March. This is something new for a market dominated by state-run Petrobras until last December.

"The fears about the gas spot market are being dissolved," said one trader.

One spot transaction reported to Argus used national price references other than crude benchmarks, which were a foundation of the old Petrobras gas pricing model. The purchase was intended to make up for unmet contractual supply volumes because of field maintenance.

Other transactions heard in the market were aimed at correcting pipeline obligations, such as the Gas of Use in System (GUS). In some cases, the GUS can be paid by gas carriers with extra gas injected into the pipelines.

The need for GUS is something new in the