The New Gas Law (Bill 4.476/2020) is approved by the Brazilian House of Representatives
The Brazilian House of Representatives approved, over the night of March 17th, 2021, the text of the New Gas Law – Bill 4.476/2020 (former Bill 6.407/2013). The text was approved by majority, without the amendments proposed by the Federal Senate. Therefore, the text of the New Gas Law follows the original draft proposed by the Mines and Energy Commission of the House, in full, according to the previous vote that took place in the House on September 1st, 2020.
The New Gas Law will now be submitted to the presidential approval.
The approval of the new regulatory framework for the natural gas sector is relevant for the market opening, as well as fostering new investments for the industry, since it represents the consolidation of several measures that were extensively discussed by government programs - Gas to Grow (previous program) and New Gas Market (“Novo Mercado de Gás” - current program). Some of the measures were partially implemented through Agencies’ regulation, such as the model of entrances and exits for the transport system and the unbundling of the transporters in relation to the other competitive agents of the gas production chain. The New Gas Law will provide much-welcomed legal security, fostering the development of the Brazilian gas market.
We highlight the main changes introduced by the New Gas Law in relation to the current Gas Law (Law 11.909/2009), which will be fully revoked:
- Regime for granting of gas transportation activity: regime for granting of gas transportation activity will be changed from concession to authorization, preceded by a public call to be made by the Brazilian Agency of Oil, Natural Gas and Biofuels (ANP) (art. 4, New Gas Law).
- Regime for granting stocking activity: regime for stocking activity will be changed from concessions preceded by bidding proceeding to authorization. This measure aims to develop the country's stocking activity, important to guarantee the supply of gas in a dynamic market, with more liquidity (art. 20, New Gas Law).
- Transport service provision model: the current model is the postal or point-to-point model, in which the capacity of all stretches of gas pipelines existing between the origin and the destination of the molecule are contracted in their entirety. The new model of entry and exit allows the independent hiring of the entry capacity or of the exit capacity of the gas pipelines by interested entities, allowing greater flexibility to the transportation system. (art. 13, New Gas Law);
- Third-party access to essential infrastructure (flow, processing and LNG terminals): currently access to essential infrastructure is optional by the relevant owner/operator. According to the Bill, access will be non-discriminatory and negotiated, ensuring priority access to the relevant owner/operator. This change is critical for opening the market, as it will provide gas owners the needed access to existing infrastructure, representing a greater supply of gas to the grid (art. 28, New Gas Law).
- Complete deverticalization ("Unbundling"): the current law adopts the model of legal separation between the transport activity and other activities in the gas sector chain (producers, commercializing agents, etc). The Bill provides for the total deverticalization of the industry, which is the separation under the legal, stockholding and functional aspects between carriers and other competitive agents of the sector. In this sense, there will be the inhibition of "Self-dealing" situations, among the industry agents (art. 5, New Gas Law).
- Commercialization model: the Bill provides for measures that will make it possible to register transactions for the commercialization of the molecule in virtual hubs, through virtual platforms, by signing standard contracts. The bases for the organized market are therefore launched (art. 3, XIX, art.31, § 4, New Gas Law).
- Definition of the commercializing agents: the Bill brings the definition of the agents that, upon authorization from the ANP, can act in the commercialization of the molecule, besides the gas distributors (art. 31, § 2, New Gas Law).
We provide the entire content of the approved text in Portuguese, click here.
The Oil, Gas & Offshore team is available in case of doubts.