Brazil gas prices poised to tick higher

Brazil gas prices poised to tick higher

Sao Paulo, 23 May (Argus) — Brazilian natural gas on the wholesale market may trade at higher prices under new agreements now being negotiated for supplies starting in the second half of 2022, as companies consider new types of contracts and test new price levels.

These higher prices may be seen particularly among local gas distributors that signed deals with independent producers in the first half of 2021, although those prices will still likely be lower than what state-run Petrobras offers.

Gas producers who participated in and won supply tenders early in 2021 were offering volumes at a discount to what was offered by Petrobras, which at that time priced gas around 11pc of Brent crude. Previously, those smaller producers would sell their production at the wellhead to Petrobras at close to cost, so under the new system they could sell their gas well below Petrobras' prices and still make more than they would have in the past.

Gas bought by Petrobras from other producers averaged R19.6/mmBtu ($3.95/mmBtu) in March, according to oil and gas regulator ANP. Petrobras contracts under the 11pc Brent policy would be priced at $12.26/mmBtu, giving companies competing with Petrobras a large spread for gas sales while still offering