Key facts
- Brazil's ANP published first contract amendments for long-term natural gas supply agreements.
- The amendments introduce new pricing mechanisms related to Brent crude indexation.
- Agreements establish a Brent price floor of $61/bl and a ceiling of $85/bl.
- The Brent price ceiling will be triggered on August 1, limiting gas price increases to approximately 4%.
- Without the cap, gas prices would have increased by around 18.5%.
Brazil's hydrocarbons regulator ANP has published the first contract amendments for long-term natural gas supply agreements between state gas distribution companies and state-controlled Petrobras. These amendments introduce new pricing mechanisms linked to Brent crude indexation, establishing price floors and ceilings to mitigate the impact of crude price volatility on gas supply costs.
The provisions, effective August 1, implement Petrobras' new gas pricing model. This model sets a Brent crude price floor of $61/bl for February 2027-January 2029 and a ceiling of $85/bl for August 2026-January 2027. These caps are intended to soften the effect of recent crude price hikes, which had raised concerns among consumers about economic sustainability and potential demand destruction.
According to ANP data, the Brent price ceiling will be triggered during the third-quarterly price adjustment on August 1. Consequently, gas prices for distributors under these contracts will increase by approximately 4%. Without the cap, the increase would have been around 18.5%. For a contract indexed at 11% of Brent, the gas price will be approximately R1.76/m³ ($0.34/m³), up from R1.69/m³, instead of rising to R2.01/m³.