Petrobras launches natural gas auction

Petrobras (PBR) gives continuity to the development of the secondary natural gas market, kicked-off in 2009, and, next March 16, the Company will hold yet another auction with a six-month term, offering 22 million cubic meters per day to consumers for delivery beginning on April 1. Additionally, the company debuts a new natural gas sales mode in the secondary market in the upcoming six months, offering the possibility of weekly purchases of the natural gas thermoelectric plants do not use and for even lower prices. 

The two products - auction and weekly sale, which will marketed over an electronic platform - are part of Petrobras' strategy to boost sales by creating means for the secondary market's natural gas to reach the final consumer for lower prices. Once the purchase has been agreed to, the commitment is for firm product delivery.
The experience accumulated in holding nine short-term auctions, between April and September 2009, revealed this is an efficient mechanism to market surplus gas efficiently and to attain competitive pricing formed by the distributors themselves. The average discount, as high at 41% in January 2010, was 35%. Nonetheless, the volume that was actually consumed was lower than that offered in these auctions. 

During a meeting held with natural gas market agents Thursday morning (02/25), Petrobras showed how the two products will work and highlighted their reason for being: having price reductions reach those who actually use the natural gas, i.e., the final consumers. 

For the 2010 version of the six-month auction, the novelty is that a progressive price reduction relative to the averages of what has been being picked in previous auctions will be established as sales increase.
In the weekly sales, in each order, the distributors can request volumes of natural gas per period of up to four weeks. The electronic request can be made from Monday to Thursday. On Friday, Petrobras will confirm the transactions that were accepted considering the cost of supplying the gas based on the thermoelectric demand of the upcoming week. The results - volumes and prices - will be announced weekly. 

The secondary natural gas market, which is under development in Brazil by means of the auctions and, now, via weekly sales, is typical of countries that have reached maturity in their natural gas industry, whether through the available infrastructure or based on the development of their markets. 

The creation of the secondary natural gas market in Brazil was possible on account of the investments Petrobras made in boosting domestic natural gas production, in diversifying imports (Pecém and Guanabara Bay Regasification Terminals), and in enhancing the transportation infrastructure (gas pipelines, compression stations and systems, city gates), increasing the flexibility in supplying the thermoelectric and non-thermoelectric segments. 

The public notice for the auction, which will be available on Petrobras' website as of this Thursday, determines the sales will be made in sub-markets defined based on the logistics characteristics of each region, with the novelty being the interconnection of the Southeastern and Northeastern regions via GASENE, the integration gas pipeline, which will go on stream in march.



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