Brazil Congress OKs New Natural Gas Regulatory Rules

BRASILIA (Dow Jones Newswires), Dec. 11, 2008

Brazil's lower house in a voice vote Thursday approved a final version of new regulatory rules for the country's natural gas sector aimed at lowering local energy costs and boosting supplies.

The bill, one of several measures introduced by the government to improve efficiency in the country's economy, will establish new rules for exploration, processing, transport, and sales of gas, including regulation of construction and operation of natural gas pipelines.

"The vote on this bill was important because it will help facilitate investment in infrastructure," said lower house government leader Henrique Fontana. "Congress is ready to vote on all bills that reduce the impact of the current economic crisis on the country."

Specifically, the legislation established concession rules and fees for construction of new pipelines for third-party users and producers. The bill also opens greater private access to state-run oil company Petrobras' gas pipelines. Under the text of the legislation, however, the company was granted a 10-year exclusive rights to use of its existing pipelines.

The gas regulatory bill had been awaiting approval in congress since early 2007. Following a wide-ranging accord between government officials and business leaders in the sector, the bill was pushed through congress by lawmakers this week as a measure to counteract the effects of a broadening economic slowdown.

Under the agreement, all large producers and importers who consume their own gas will be allowed to build their own pipelines if distribution companies are not able to supply all their needs.

The bill also introduces the figure of "free consumers" who are allowed to buy gas from any seller in the country or build their own storage and transportation facilities.

Materials sector analysts said the legislation could be especially beneficial to companies in the steel and mining sectors, who have difficulty obtaining reliable energy supplies at remote locations.

Passage of the gas bill took on special urgency last year after Bolivia threatened to shut down gas supplies to Brazil following a dispute over royalty payments.

Brazil increased it's dependence on natural gas significantly following a local energy crisis in 2002 that prompted nationwide energy rationing.

The final version of the legislation approved Thursday will now be sent to Brazilian President Luiz Inacio Lula da Silva for signature.  

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