March 21, 2019 / 3:38 PM / 4 months ago

Brazil to present plan to overhaul natural gas sector by June: minister

BRASILIA (Reuters) - Brazil Mines and Energy Minister Bento Albuquerque said on Thursday that the government will present a program for overhauling the natural gas sector by June, a move aimed at lowering energy costs in the country.

The program will be called the “New Gas Market” and is separate from the “Gas for Growth” program pursued under previous President Michel Temer, Albuquerque told reporters in a briefing.

The minister gave few specifics on the content of the policy, saying it was being discussed among a variety of ministries.

The overhaul is part of a sweeping attempt by the government of President Jair Bolsonaro, who assumed office on Jan. 1, to introduce free market policies across the Brazilian economy, an effort led by Economy Minister Paulo Guedes.

Guedes told newspaper O Estado de S.Paulo in an interview earlier this month that the government would promote “a shock of cheap energy in the market” that would reduce the cost of natural gas by 50 percent.

Albuquerque said it was difficult to quantify the potential impact and he didn’t know if the policy would achieve that 50 percent reduction.

“The objective is that we have energy costs that permit companies to become increasingly competitive,” the minister said.

The plan will include ensuring there is infrastructure in place for the sectors that use natural gas, he said.

The effort will require working with state governments to end monopolies of regional state-owned gas distributors, he said.

The cheap global price of fuel thanks to a natural gas boom in the United States and the promise of more supply coming from Brazil’s massive offshore “pre-salt” oil and gas area support the case for investing in the natural gas sector, he said.

ENDING RURAL SUBSIDIES

Bolsonaro’s administration plans to maintain a policy set by Temer in December to gradually phase out electricity subsidies for rural users and those using energy for irrigation purposes over a period of five years, said Marisete Pereira, the vice minister for mines and energy.

Temer had issued a decree days before leaving office that gradually ends a variety of electricity subsidies, while immediately eliminating loopholes that allowed a single user to collect multiple discounts.

The office of the president’s chief of staff is preparing another decree maintaining the end of subsidies but also providing for a more gradual elimination of the loopholes, Pereira said, speaking at the briefing with Albuquerque

In 2017, rural users and farmers who used irrigation received roughly 3.6 billion reais ($946.75 million) in discounts on their electricity usage.

Reporting by Jake Spring; Editing by Marguerita Choy

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