New Gas Law: opportunities and challenges for the businesses in this sector


New Gas Law: opportunities and challenges for the businesses in this sector

The Law was followed by the Confaz regulations, but the sector still demands that other points be clarified to increase legal certainty

By Patrícia Guimarães

The Lei 14134/2021, known as the new Gas Law, sanctioned in April, represents a regulatory mark for the natural gas market in Brazil. After years under debate, this approval arrives with a potential to boost business and drive the economy, remaining the challenge for the legislative system to be fully adapted to this new moment, ensuring certainty for investors.

According to the Ministry of Mines and Energy, investments of approximately BRL 74 billion and the creation of more than 33,000 jobs in the area are expected in the next 10 years.

The Law provides for the deconcentration of the market by not allowing the same company to operate in all phases, from extraction and production to distribution. Another important measure is the granting of authorizations instead of concessions for the exploration of natural gas transportation by private companies.

Indeed, the advances in legislation will contribute to the implementation of many profitable projects in Brazil. Those companies that are already structuring themselves and seeking local partners to explore the opening of this market will be the ones to lead the way.

The new Gas Law:

  • Encourages competitiveness and free competition
  • Creates jobs
  • Decreases business concentration, previously under the control of a few agents
  • Reduces production costs
  • Decreases the final price for consumers
  • Adds more legal certainty to this market

What changes with the New Gas Law

The approved legislation, among other issues, it:

  • Authorizes the National Agency of Petroleum, Natural Gas and Biofuels (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis - “ANP”) to adopt measures to track the operation of the natural gas market and adopt mechanisms to encourage efficiency and competitiveness and to reduce concentration in the natural gas supply;
  • Starts to consider the authorization regime and no longer a concession for natural gas transportation activities;
  • Provides for third party access to gas pipelines, natural gas treatment and processing units, underground storage facilities and Liquefied Natural Gas (Gás Natural Liquefeito - “LNG”) terminals;
  • Establishes that the ANP can authorize the company to perform the underground storage of natural gas, a process that now occurs at the interested party's own risk;
  • Brings new tariff rules for gas transportation;
  • Establishes that the natural gas transportation tariffs will be proposed by the carrier and approved by the ANP, after public consultation;
  • Provides for a public tender process to be carried out by the ANP when there is more than one carrier interested;
  • Forbids any direct or indirect corporate relationship of control or affiliation between carriers and companies or consortium of companies that operate or execute functions in the activities of exploration, development, production, importation, loading, and commercialization of natural gas.

In its final provisions, the law mentions that the Ministry of Mines and Energy and the ANP must articulate with the states and the Federal District to harmonize and improve standards, including the regulation of free consumers.

The tax challenges persist

In addition to the New Gas Law, Order No. 23/2021of the National Council for Treasury Policy (Conselho Nacional de Política Fazendária - “Confaz”) provided for new pieces for the regulation of the natural gas processing activity through the Sinief Adjustment 01/21. However, it is necessary to have caution when evaluating the impact of recent rules for effective operation, since a new scenario is beginning to be built.

The Sinief Adjustment is an important addition to the tax regulations related to gas processing. In this Adjustment, issues are established related to:

  • inventory control of unprocessed natural gas, processed natural gas and natural gas’ liquid derivatives;
  • electronic invoices (NF-e) for symbolic received and shipped natural gas’ liquid derivatives;
  • tax procedure on shipments of unprocessed natural gas for processing and on the returns of goods from industrialization by ordering;
  • unprocessed natural gas and liquid derivatives of natural gas loans.

The demand for more details about the ICMS, a state tax, persists. There are also uncertainties related to the classification of certain products, gas pipelines, rules for transportation and distribution and negotiations that will be given by the states, for example. Thus, a joint nationwide decision is necessary to balance the rules.

In other words, the tax complexity already typical of Brazil can still bring some legal uncertainty and challenges for gas market operators. Even having many issues already solved, improving the legislation at other stages is important, definitively overcoming taxation-related issues in the sector.

How DPC can support clients in this segment

Domingues e Pinho Contadores, a pioneer in supporting gas companies, is the ideal partnership to provide accounting, financial and tax support to businesses that willing to benefit of current opportunities and occupy a prominent place in this growing environment.

With a consultative bias, DPC's multidisciplinary team assists companies in their short, medium and long term initiatives, ensuring security for decision making, compliance with legislation and meeting regulations at all times and challenges experienced by the client.

Author: Patrícia Guimarães, partner at Domingues e Pinho Contadores.

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