In order to change the current situation, several steps will need to be taken, such as creating a competitive market to increase gas supplies and new players in Brazil's upstream, midstream and downstream sectors to unlock investments.
"Brazil lives in a bubble that is far from competitive in a global market" a Brazil-based source said on the sidelines at S&P Global Brazil Oil & Gas Conference in Rio de Janeiro.
Ending state-led Petrobras' monopoly of Brazil's gas industry is seen as the most important means of making domestic gas prices competitive. Brazil's gas supplies come from three sources: from Bolivia via pipeline, as LNG aboard tanker and domestic production.
"Brazil's gas price is one of the most expensive in the world," a second Brazil-based source said. "Despite the domestic production and gas imports from Bolivia, the price we end up paying is in fact the spot LNG import price. This monopoly is costing a lot, with many businesses leaning towards closing due to high cost of Brazilian natural gas."
While gas prices in the US and Mexico are in a range of $3-$4/MMBtu, in Brazil the price is more than $10/MMBtu, he added.
Brazil's gas demand has increased to 78 million cu m in 2018 from 60 million cu m in 2008, a narrow level of growth given the size of the country and its resources. Besides power generation, domestic gas production could boost Brazilian industrial growth, market participants said. The gas found in Brazil's offshore subsalt, for example, is rich in hydrocarbons from which multiple NGLs, such as ethane, propane and butane, essential in the petrochemical industry, can be extracted, they said.
"Domestic Brazilian natural gas can be used to boost the petrochemical industry, create more jobs and improver the economy," the second source said.
This, in turn, could trigger further growth for Brazil's gas industry.
"If Brazil grows 3%-4% per year, this can generate a 5% growth in power demand," the first source said. "All this can generate more investment in gas exploration," he said, adding that increasing price competitiveness and regulatory improvements are decisive to create a new gas scenario in Brazil.