Tauil & Chequer Advogados in association with Mayer Brown has helped Brazilian gas company TAG sign the country's first ever natural gas transportation contract - in which Petrobras is not the transporter - with chemicals company Proquigel.
Machado Meyer Advogados advised Proquigel. The deal was signed on 28 January, after Brazil`s national petroleum and gas agency ANP had approved the contract a week earlier.
TAG will deliver 2.3 million cubic metres of natural gas per day from state-owned energy company Petrobras to Proquigel, starting in March. The gas will be provided from Petrobras' plants in the state of Bahia and Sergipe. TAG will control the entire transportation process from the entry point to the exit point.
This is Brazil's first gas contract where Petrobras is not managing the transportation. It comes after Petrobras made a deal with competition regulator CADE in July 2019, in which it agreed to reduce its role in the gas transportation and distribution industry by the end of 2021. Petrobras also agreed to sell off assets in the sector, including its sale of TAG in 2019.
Tauil & Chequer partner Tiago do Monte Macedo, who represented TAG in the contract negotiations, says sowing cooperation between the parties was the trickiest part of the deal. "This contract was made possible by the agreement between CADE and Petrobras, which waived exclusivity in pipelines, [allowing] agents other than Petrobras to ship gas," he says.
While the sale of TAG was an important milestone in Petrobras' agreement with CADE, the state-owned company had already divested some pipeline assets before then. It sold a majority stake in its gas pipeline network Nova Transportadora do Sudeste back in 2016 for US$4.4 billion. More recently, Petrobras began the process to sell its control of Transportadora Brasileira Gasoducto Bolívia-Brasil earlier this year.
The Brazilian congress is in the midst of debating a new gas bill, as part of its Novo Mercado de Gás (new gas market) programme. A first draft was approved by the Brazilian House of Representatives on 1 September. Following amendments made by the Senate in December, the bill is currently back in the lower house for revision. The bill intends to promote competition by opening the gas market to private actors, attract investments and support Brazil's economic recovery following the pandemic.
The bill will also reform the country's gas distribution from a regime of concessions awarded by the government to one where concessions are authorised by the ANP. This is expected to reduce bureaucracy and boost the construction of pipelines.
While the proposed gas bill is good, says Macedo, the amendments made to the bill by the Brazilian Senate in December only benefit the interests of state distributors. In his eyes, the amended bill will likely be rejected by the House of Representatives. "If these amendments proposed by the Senate are rejected, it will be a good thing. Without the amendments, the bill will increase competition with less state intervention in transport activities, which will ensure greater attractiveness for investment in the gas market," says Macedo.
The bill also aims to "de-verticalise" the market. It does not allow companies to act in multiple stages of the production of natural gas. For example, gas transporters cannot be directly or indirectly controlled by, or affiliates of, any companies acting in the exploration, developments, production, importation or sale of natural gas.
Macedo believes this aspect of the bill may restrict actors in the gas market and ultimately limit investments in projects related to production, import or commercialisation of natural gas. To further improve competition, he says, "individual states should be allowed to improve their state laws and regulations to guarantee access to the gas distribution network for self-producers and self-importers." This would increase gas availability to consumers and the activity of liquefied natural gas and compressed natural gas distribution, he adds.
Counsel to Transportadora Associada de Gás (TAG)
Tauil & Chequer Advogados in association with Mayer Brown: Partners Felipe Batista, Fernanda Mattos, Alexandre Chequer and Tiago do Monte Macedo, and associates João Marcelo Xavier Rodrigues