Origem Energia and TAG – the largest gas pipeline in Brazil, bordering the coast – are creating a joint venture to invest in natural gas storage, a market that does not yet exist in Brazil but is very common in Europe.
Origem will contribute to the JV its depleted gas fields located in the Alagoas Complex – reservoirs that were depleted by Petrobras in the past and which will now be filled again with gas.
TAG will contribute an investment of US$200 million (around R$1 billion at today’s exchange rate), which will be phased in over the next few years and used to purchase equipment and prepare the reservoirs to begin operating.
Immediately, TAG will invest US$30 million that will allow it to reach a storage capacity of 106 million cubic meters of gas/year.
As the market develops, the company will make additional investments to reach a capacity of 500 million cubic meters/year.
Luiz Felipe Coutinho, the CEO of Origem Energia, told Brazil Journal that the total storage capacity of the depleted fields at the Alagoas Complex is 1.5 billion cubic meters, but that to use all this capacity it would require additional investment from JV.
“Gas consumption in Brazil today is between 50 million and 140 million cubic meters/day, depending on thermoelectric dispatch,” he said. “This means that in the initial phase we will be able to store 1x the country’s daily consumption and in the final phase, 5x. When the project is at full capacity, we will be able to have a 20-day supply of consumption.”
Storage brings several benefits to the gas market.
Basically, it allows the customer – typically oil companies and thermoelectric plants – to store gas at times of low demand to use it or sell it when demand increases, normally in periods when dispatch from thermoelectric plants is activated.
In addition to thermoelectric plants, this solution is especially important for large pre-salt producers that produce gas associated with oil.
“If the large producers have nowhere to store gas in times of low demand, they only have one alternative: reinject the gas into the sea, failing to take advantage of this excess supply,” said Luiz Felipe, adding that today half of all gas produced in Brazil is reinjected.
This dynamic means that the country ends up importing much of the gas it needs during times of peak demand.
“Storage will bring less dependence on imports,” said Gustavo Labanca, the CEO of TAG. “It is the first gear to try to change this trap that Brazil finds itself in, and to make better use of our abundant resources.”
Labanca also says that natural gas is the only fuel that allows for the energy transition, since coal – used by some thermoelectric plants – is extremely polluting. The problem with gas is that it lacks flexibility, something that storage solves.
Despite the benefits, the storage business never developed in Brazil due to the fact that the country lived, until recently, in a monopoly situation, with Petrobras dominating all links in the chain. With the opening of the market, new players who began to demand this type of service.
Furthermore, the new Gas Law, approved in 2021, now provides for the possibility of storage – but the ANP still has to regulate the matter, a discussion currently underway.
Regulation will define exactly how this market will work and the services that can be offered.
But in practice, the mechanism is simple: the storage fields at the Alagoas Hub are already connected to the TAG network, which connects with the entire national network.
With this, “any gas connected to the national grid can be injected into our reservoir. Afterwards, the gas can be removed from the fields and sold anywhere in Brazil,” said Luiz Felipe.
The charging model for services is still being defined by the JV, but Origem’s CEO said that there will be a broad offer to meet different customer profiles. “There will be customers who will want to inject the gas and maintain it for 12 months. Others will want to inject one day and remove it the next.”
Origem – which is controlled by Prisma Capital, owner of 94% of the capital – purchased the Alagoas Complex from Petrobras for US$300 million in 2021. Since then, the company has been executing an investment plan of another US$300 millions.
Pedro Arbex
