On June 25th, the National Council for Energy Policy (Conselho Nacional de Política Energética – CNPE) enacted Resolution No. 16/2019, which establishes guidelines and improvements to energy policies regarding the promotion of free competition in the natural gas market (the “Resolution”).

The Resolution aims to promote the competition in the natural gas market through measures that, as well as safeguard national supply security and product quality, mitigate regional price discrepancies, integrate and coordinate the transport system , gradually reduce the number of market areas and increase liquidity at the virtual trading point, as well as the  integration between the natural gas, electric and industrial sectors.

The Resolution determines that the dominant in the sector must: (i) assign all of its shares in transportation and distribution companies; (ii) define its  moviment needs at the transportation system, allowing the participation of other agents; (iii) provide information to the market on the general conditions of access to third parties to its LNG disposal, processing and terminal facilities; and (iv) promote a program of sale of natural gas through auctions, allowing the participation of new producers, importers and traders.

To this end, it will be necessary to ensure the supply of available transportation capacity, the autonomy and the independence of transporters, the organization of the transport system by means of common network codes, the drawing up of codes for access to production drainage pipes, natural gas processing units and LNG terminals, the implementation of market areas and respective virtual points of trade, the publication of standard transportation contracts and the implementation of natural gas liberation programs to reduce market concentration.

In addition, the Resolution recommends that the Ministry of Mines and Energy – MME develop technical subsidies for the promotion of the exploitation of natural gas onshore and provide incentives for the States and the Federal District to adopt regulatory reforms and structuring measures for the opening of regional markets, encouraging the participation of free consumers, self-producers and self-importers, create autonomous regulatory agencies, privatize state concessionaires of local piped gas service, and make necessary tax adjustments to open the market.