Brazil Prioritizes Interior Pipeline Expansion to Boost Gas Supply
Eugene Gerden, International Correspondent
(P&GJ) — Brazil is expanding its domestic gas pipelines network to ensure supplies of gas to the interior part of the country and to mitigate shortages in central areas of the nation.
Implementation of these plans holds strategic importance for the country, given the recent historical agreement signed by the Brazilian and Argentinian governments last November. In that agreement, Brazil will obtain natural gas supplies from the Argentinian Vaca Muerta field—one of the world’s largest natural gas fields in terms of reserves.
The agreement involves the supply of 2 million cubic meters per day (MMm3d) of natural gas, starting from the beginning of the current year, and requires the establishment of reliable transport infrastructure. However, the latter has always been a challenge for Brazil, as the level of its development has always been poor, even compared to other neighboring nations in South America.
According to the Brazilian Institute of Oil and Gas, the Brazilian gas pipeline network has a length of 31,068 mi (50,000 km). Of this, only 5,840 mi (9,400 km) of pipeline is for transportation, and 25,786 mi (41,500 km) of pipeline is for distribution networks. Brazil is still far behind even other emerging nations in terms of serving the population with gas—the nation’s pipeline network is approximately 10 times smaller than that of the U.S.
Perhaps the biggest challenge of the sector is that Brazil’s gas pipelines network is located primarily along the coastal part of the country. That means that the supply of gas to central and interior parts of the country remains insufficient due to a lack of infrastructure.
While the agreement with Argentina will allow Brazil to satisfy up to 30% of its domestic gas needs, it is currently unclear how the gas will be transported to Brazil. Both Argentina and Brazil have been considering several routes, including ones via the territories of other South American nations.
While currently there are no exact routes planned for transporting the gas, there are at least four options on the table:
- The reversal of Gasbol (Bolivia-Brazil Gas Pipeline) to transport gas via Bolivia
- Building a new gas pipeline through the Paraguayan Chaco, transporting gas supplies via Paraguay
- Connecting Argentina directly to the Brazil Uruguaiana pipeline network (in the state of Rio Grande do Sul)
- Sending gas supplies via Uruguay.
Argentinian gas supplies will increase from 2 MMm3d to 10 MMm3d in 2026–2028 and reach 30 MMm3d by 2030. The final volume is equivalent to 30% of Brazil’s natural gas demand.
Most analysts believe that the first deliveries will be tied to Gasbol, which is owned by Gas TransBoliviano S.A. (GTB) and Transportadora Brasileira Gasoduto Bolívia-Brasil S.A. (TBG). This gas pipeline is interconnected to other gas pipelines within Brazil and Bolivia, including a pipeline that transports gas to Argentina. The gas will leave Argentina at a cost of $2/MMBt. Once the gas arrives in Brazil, the cost will increase to $7 MMBtu–8 MMBtu.
Despite the advantages of such an agreement, it has already sparked serious criticism in Brazil due to Argentina’s use of hydraulic fracturing to extract gas from Vaca Muerta. This practice is opposed by environmentalists for causing soil contamination, and thus, is prohibited in Brazil. The agreement may have negative consequences for Brazil in the G20, as the reduction of emissions and environmental protection has, in recent years, become a priority for Brazil’s government.
Another option is building a gas pipeline to connect the province of Buenos Aires to the Brazilian border city of Uruguaiana. Financing for this pipeline was expected to come from the National Bank for Economic and Social Development (BNDES); however, negotiations have stalled due to tense relations between Argentina’s current President, Javier Milei, and Brazilian President Luiz Inácio Lula da Silva. The political element, according to analysts, may pose a threat to the cooperation of both countries.
Currently, Brazil’s gas pipelines network is significantly smaller than Argentina’s—Argentina has a total network of 100,972 mi (162,500 km) of pipelines which is roughly three times the size of Brazil’s total network.
Despite this, Brazil’s daily gas production (170 MMm3d) is higher than that of Argentina, which produces just over 151 MMm3d. Despite its higher production, Brazil has lagged Argentina in building the necessary infrastructure to move natural gas to demand centers. Another factor that explains this dichotomy is the production profile of each country. While Argentina has a large part of its reserves on land, Brazil conducts most of its production at offshore.
In recent years, Brazil’s government has initiated a series of reforms in the gas transportation sector, and in 2023, it announced the beginning of a period of de-monopolization of the sector (which ended the era of Petrobras’ market dominance), as well as the attraction of $20 B in investments in developing the country’s gas pipelines network.
As part of previous plans by Brazil’s federal government, the country’s gas pipeline network was supposed to be expanded by 1,056 mi (1,700 km) over the next few years, from 5,840 mi (9,400 km) to 6,835 mi (11,100 km). Two years later, the situation in the industry remains complex, and no serious results have been achieved since that time.
According to Brazil’s Poder 360 business publication, there are several sedimentary basins in Brazil that are fundamental to national gas production. These basins are located both onshore and offshore; however, their connection to the nation’s pipeline infrastructure is poor.
Natural gas production has gained momentum in Brazil in recent years thanks to the accelerated development of pre-salt fields off the eastern coast. More active development in other basins—such as Parnaíba, Solimões and Sergipe-Alagoas—is also considered important to the Brazil government. However, this activity is still insufficient to meet Brazil’s overall gas needs, and increasing gas supplies from Argentina is crucially important for the country.
At the same time, it is also important to direct gas supplies to the central parts of the country, which often experience gas shortages, especially during wintertime.
The expansion of a gas pipeline network towards the interior part of Brazil and its central regions is essential for the country’s future, and it is considered a major priority by the Brazilian government. The limited infrastructure in the country is also reflected in the high volume of reinjected gas, which currently exceeds 50% of national production (83.6 MMm3d).
Action Needed. Every year, Brazil sets new reinjection records due to the increase in production coming from the pre-salt reserves. Still, most analysts believe that a solution to the problem of reinjections will require serious action from the state, given that reinjection remains a commercial strategy for oil companies, such as Petrobras, to increase oil production.
The injection of natural gas, carbon dioxide, water and other fluids increases pressure in the reservoirs, helping to extract oil. This is important, considering that it is more profitable to produce oil than gas.
According to official statistics, oil companies operating in Brazil returned about 94.5 MMm3d to development wells, equivalent to 55% of total production. Brazil is a major oil exporter, which means that natural gas still faces many challenges, while 90% of the natural gas produced and sold in Brazil comes from fields associated with oil.
In the meantime, Brazil’s government is aware of the existing problems and is planning to take additional actions to speed the development of gas pipeline infrastructure in the country. As part of this effort, the Brazilian energy regulator, the Energy Research Office (EPE), officially presented a new Plan for Gas Transport Pipelines (PIG) at the end of February.
The plan involves the implementation of at least eight gas pipeline projects, totaling 2,300 km, with two projects also being designed to transport biomethane. The total investment is estimated at $5.1 B (BRL$29.2 B).
According to EPE’s President Thiago Prado, the biggest hopes are on shale gas reserves in Argentina’s Vaca Muerta. Brazil’s top officials say it is also important to integrate Brazil’s gas pipeline network with other South American nations. “Such a situation provides Brazil with an opportunity to participate with other South American countries in the construction of a gas pipeline network that will allow us to make the most of the region’s potential,” said Thiago Prado.
According to Marcello Weydt, Director of the Natural Gas Department of the Ministry of Mines and Energy (MME) of Brazil, increasing natural gas pipeline imports from Argentina and other South American neighbors will result in lower prices for domestic consumers. “Competition stimulates [the] competitiveness of our country, and that is exactly what the MME is increasingly focused on — developing new natural gas supplies,” he said.