Petrobras gas policy sparks anti-trust case

OREANDA-NEWS. August 09, 2016. Brazilian state-controlled Petrobras' natural gas distribution is under scrutiny by anti-trust watchdog CADE.

A preliminary CADE investigation recommended that Petrobras be charged with abuse of its dominate market position and anti-competitive practices.

The case was filed by Sao Paulo gas distributor Comgas, which contends that Petrobras' policy of offering discounts for only one type of gas contract favored its own gas distribution subsidiaries. The company said today it is following the case and "believes in Brazilian institutions and their ability to analyze and curb anti-competitive practices."

Petrobras offered the discount in 2011-15 on gas contracts associated with a "new pricing policy" that encompassed domestically produced gas as well as imported LNG and pipeline gas from Bolivia.

Comgas primarily receives gas from Bolivia using Petrobras' transportation capacity contract (TQC), which was not awarded the discount. As a result Comgas was forced to sell its gas at a higher price than its Petrobras-owned competitors such as Gas Brasiliano, which enjoyed the discount.

A final date for a CADE hearing has not yet been set.

The case highlights some of the challenges that Brazil's gas distributors currently face because of Petrobras' monopoly position. Although Brazil's has several private-sector gas distributors such as Comgas, Petrobras controls both the pipelines and supply.

As part of its broader restructuring, Petrobras has already sold some of its gas pipelines and is seeking to sell other assets, such as two of its three LNG regasification terminals and associated power stations.

The company has already sold a minority stake in its gas distribution subsidiary Gaspetro to Japanese trading house Mitsui, and is in exclusive negotiations with Canadian asset management firm Brookfield for the sale of its southeastern gas pipeline subsidiary NTS.

But the divestiture campaign is moving slowly, partly because of investors' regulatory concerns that the government is hoping to address with a new regulatory framework.

One option currently under consideration is the creation of a regulatory body to control gas flows, similar to the electricity sector's national systems operator (ONS). The agency would determine access to gas pipelines and would facilitate gas trade, allowing more players access to the fuel.