In 2019, the Ministry of Mines and Energy, along with the Ministry of Economy, the National Petroleum Agency ("ANP"), the Energy Research Company ("EPE") and the Administrative Council of Economic Defense ("CADE"), launched the New Gas Market project. It aims to promote the competition, attract domestic and foreign investments, ensure the gas supply and reduce prices for the final consumer. This is an improved version of the 2016 project “Gás para Crescer” (“Gas for the Growth”). MSI's Brazilian law member Vieira Coelho Advogados provides an update.
One of the most significant challenges to be faced by this project is the need to improve the poor position occupied by Brazil as one of the countries where the gas price are the highest in the world, as well as the supplier of the most expensive gas in Latin America, according to EPE. For illustration purposes, while in Brazil gas the is traded for approximately US$ 14 per million BTU, in Europe - where many countries do not even produce such commodity – the price range from US$ 7 to US$ 8 per million BTU, and in the USA the price is as low as US$ 4 per million BTU.
Given the essential nature of the energy sector for the industrial production, the high cost of the natural gas impacts adversely the growth of the domestic market.
As per such project, the government's primary commitments to this project is to break the monopoly of state gas distributors. As a consequence thereof, Petrobras undertook to divest its equity in the gas distribution companies responsible for 19 of the 27 states of the federation, which in the past were the exclusive concessionaires for the supply to the final consumer.
The creation of independent regulatory agencies and entities aiming to regulate the free commercialization of the natural gas in similarity with the electric power free market are revolutionary, such as the privatization of the state distributors and the update on the regulation of the free consumers, self-producers, and self-importers.
As regards taxation, the states of the federation entered into an agreement to modify the Tax on the Circulation of Goods and Services - ICMS tax rules, replacing the physical for the contractual flow of gas system thought adjustments to the National Integrated Economic Information System - Tax – SINIEF.
The present article has as purpose to highlight material aspects of the tax system applicable to the natural gas market in Brazil 