Q&A: Brazil’s Ceará state seeks gas and power projects

Brazil's Ceará state aims to attract natural gas and power investments to help improve access for its companies. The state recently announced agreements with international investors, including oil major BP, to develop a natural gas hub at the Port of Pecem, after state-run company Petrobras reduces its position in the northeastern region. Argus talked to Francisco de Queiroz Maia Jr, economic development secretary for the Ceará government, about the unattended gas demand in the state and how the state acts to attract investments.

How did you reach an agreement with BP to develop a gas hub?

BP talked to Ceará through its renewable energy division to invest in the state about eight months ago. I showed the company our intentions to facilitate investments in Ceará, and this unfolded to this memorandum of understanding (MOU), to guarantee the natural gas supply for the state.

This is important since new players will open new spaces in the market after Petrobras reduced its share in the northeastern states. Petrobras was participating in the natural gas market in our state for 20 years, and we still have areas away from the seashore that do not receive piped gas. With Petrobras divesting in Ceará, we need to find new sources to supply our state.

How did the state receive the information that Petrobras would not supply gas to Ceará anymore?

We had to articulate to find ways to meet gas demand in our state. We had signals that this would happen since they announced the divestment process to focus on oil production, but I believe this goes the opposite way of the rest of the world that is moving to cleaner energy, while Petrobras is focusing on crude.

In Ceará, how are you dealing with the energy transition?

There will be a coexistence with liquid fuels and cleaner energy. Ceará wishes to guarantee its own gas supply, that is why we invested in the local gas distribution company Cegás and now will work to make it stronger. Our plan is to seek partnerships, besides the current one with Mitsui after Petrobras sells its share, to work towards Cegás being able to guarantee the gas supply to the state.

Is the natural gas demand restrained in Ceará?

No doubt it is. If we had more natural gas, we would have gone through the drought last year with much lower stress and lower power prices. This was partially due to lack of gas supply management, what is not caused by the water crisis.

Water consumption is much higher nowadays combined with a change in the rain patterns, which are more critical. In Ceará for the last eight years we have been facing critical levels of rains, and with the proper planning we did not have water shortages.

Are large gas consumers in Ceará excited for the gas market opening?

The bilateral contract market is seen as a positive alternative for companies to search for competitive prices. We saw this happen successfully in the power market and I believed the new gas law can bring that to the gas market as well. And this will make the market move to deliver what the consumers in the new market need, which is usually better prices.

I think we will see a big deal of changes in the gas market in the country to benefit the consumers, mainly in the northeastern region, where you still have not a lot of households using natural gas, differently from the Sao Paulo and Rio de Janeiro markets.

I foresee an expansion of the residential use of natural gas in the state of Ceará and expansion of general consumers in more cities other than the capital Fortaleza and its outskirts being served with piped gas.

I also believe in a competition between the states in the northeastern region, with companies perceiving this region as an expansion market, while Petrobras focus in the southern and southeastern regions.

By Flávia Pierry

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