What is natural gas?

Key uses and benefits of natural gas within the Brazilian energy scenario

Natural gas has been gaining visibility in the news, especially with the worldwide movement towards alternative sources of energy for less impact on the environment.

Dubbed “transition fuel,” natural gas is a cleaner substitute for other fossil fuels, and with abundant reserves in Brazil and elsewhere in the world, it is the best candidate to lead the race for a cleaner energy matrix, especially in emerging countries. But where does natural gas come from, and how is it used in our daily lives?

Where does natural gas come from?

Over millions of years, the accumulated decomposition of organic plant and animal matter was deposited in layers on land and on the seabed. Over time, these layers were buried under sand and rocks, and the deeper they sank, the more they were subjected to intense heat and pressure, finally transforming the decomposed organic matter in this material so rich in carbon and hydrogen that we call natural gas.

Thus, natural gas is a substance composed mostly of hydrocarbons (elements formed by carbon and hydrogen) such as methane (CH4), with concentrations above 70% and, in smaller proportion, ethane (C2H6), propane (C3H8) and other elements such as nitrogen, sulfur, carbon dioxide and water.

The proportion of each product in the final composition depends on a series of natural variables, such as formation process and accumulation conditions in the reservoir. When burned, natural gas releases lower emissions of carbon dioxide, the source of the greenhouse effect, as well as less sulfur and nitrogen oxides, which in turn are responsible for acid rain.

How and where can natural gas be used?

Versatility is one of the greatest advantages of natural gas: it can be used for steam, heat and electric power generation, and also in combustion engines for transportation, where it can replace a wide range of fuels such as LPG and fuel oil.

Because it can be used consistently and has an efficient and uniform burning process, natural gas shows high levels of efficiency in applications across different sectors: in industry, commerce, services and residences.

Demand for Natural Gas

In Brazil, the demand for natural gas is approximately 80 million cubic meters per day and this consumption is mostly concentrated in industrial operations and power generation. The chemical, ceramic, food, pulp and paper, mining and textile industries stand out in the use of this fuel, mainly due to their high levels of quality control to ensure their final product meets specifications. These sectors also reap the greatest benefits from higher productivity and reduced operating costs – natural gas helps them gain efficiency and competitiveness.

Power generation from natural gas is a significant application given the characteristics of our energy matrix. In Brazil, where hydro power prevails, thermoelectric generation can be used to complement supply with flexibility and speed. We need to count on sources that can help meet demand in peak times or in periods of drought, when there is reduced hydro power supply  and greater need to preserve reservoirs.

Distribution of natural gas

Natural gas reaches consumers through distribution companies that have been granted the concession for energy distribution through pipelines or through government-controlled companies.

Some regions in Brazil do not have gas pipelines yet. In such cases, distributors rely on trucks equipped with compressed natural gas (CNG) technology, which compresses the fuel to a pressure of over 200 bar, so that it can be transported to remote customers and reinjected into local networks.

Brazilian legislation on natural gas

With the creation of the Gas Law in 2009, guidelines were established for activities in the natural gas industry, as well as the requirements for free consumers of natural gas — those consumers who under the applicable state legislation are entitled to acquire gas from any producer, importer or trader.

Today, however, all trade operations involving natural gas are concentrated in Petrobras, both for their own production and for gas produced by third parties, since this state company owns all the infrastructure needed for transportation, treatment and regasification. Thus, on the way to final consumers, natural gas trading is limited to deals between Petrobras and distributors – distributors pass on to consumers the cost of the molecule and transportation and also add their margin for investments and for the operation and maintenance of their distribution infrastructure.

Almost ten years after the creation of the Gas Law, the free market for natural gas witnesses a series of actions that converge towards the long-expected “market opening.”

The main drivers for the possible opening are public consultation nº 6/2018 to collect contributions, data and information on the promotion of competition and unbundling in the natural gas industry, as well as the increase of natural gas supply to the market; and the Decree signed by former President Michel Temer at the end of his term, which guides the design of the new market and encourages the entry of new agents and a public call to hire transport capacity in Gasbol.

There are still challenges to overcome and divergences among different industry players to be addressed. Against this backdrop, the early months of 2019 are marked by great expectations and the year will undoubtedly be a milestone for the regulation of natural gas.

Comerc Explains Webinar on Natural Gas

In November 2018, we presented a webinar on the natural gas market. Click here to find out more and watch our video.

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