Energy Newsletter | No. 6 – January 2023

ANP discusses Local Content certification activities

On January 24, 2023, Brazil’s National Agency of Petroleum, Natural Gas and Biofuels (“ANP”) held a public hearing on the amendment of ANP Resolution No. 19/2013, which provides for Local Content Certification activities.

The ANP identified an opportunity to improve the definition of the “Total Amount of the Complete System”(Valor Total do Sistema Completo) for systems of international origin with no commercial transaction tax document, to ensure the application of the calculation method of local content deduction in international supplies that contain incorporated domestic components.

At the hearing, it was decided that ANP Resolution ANP No. 19/2013 needed to include the provision for the use of the Import Declaration (“DI”) to define the amount of the international system without a tax document. To this end, the amount would be limited to a floor between the sum of costs that make up the system and a cap of 25% above this sum of costs.

The amendment to the original draft depends on the technical and legal analysis of the Federal Attorney General’s Office of ANP, in addition to approval by the Collegiate Board.

Click here to read the full article.

Rio Energy Bay

Petrobras signed an agreement to create the Rio Energy Bay, during the MIT REAP event in Rio, held on January 31, 2023, at Museu do Amanhã (Museum of Tomorrow). As part of the Regional Entrepreneurship Acceleration Program (“REAP”) of the Massachusetts Institute of Technology (“MIT”), the project aims to pivot the Rio de Janeiro region into “Brazil’s first world-class innovation ecosystem in the energy and sustainability sectors.”

Focused on Energy and Sustainability, Rio Energy Bay is part of MIT’s acceleration program, designed to encourage innovation-driven entrepreneurship through the methodology created by the institute, as well as workshops that aim to spread knowledge and engage institutions in the sector.

In his speech, Petrobras’ CEO, Jean Paul Prates, highlighted the concern with building a future for the next generations. Prates also emphasized the company’s human and financial capacity to cooperate with such a project, and highlighted the investment made by the Petrobras Research Center (Cenpes) in the energy innovation ecosystem.

Demarest is a supporter of MIT REAP and our partner in the oil and gas sector, João Almeida, joined as a speaker in the panel “Energy transition: a global opportunity for Rio”.

Click here to read the full article.

ANP and EPE enter into technical cooperation agreement

On January 11, 2023, the ANP and Brazil’s Energy Research Office(“EPE”) entered into an agreement regarding the exchange of data and information relating to the development of technical studies. The agreement aims to increase the synergy between the two agencies and foster the development of the oil and natural gas industry, in order to attract investment and increase competitiveness in the international market.

The agreement will remain in force for five years and can be successively extended for the same period.

Click here to access the full article.

LNG: alternative methods to pipeline to be discussed in public consultation

On January 12, 2023, the Collegiate Board of ANP approved the public consultation and hearing on the revision of rules for packaging and transportation of liquefied natural gas (“LNG”) in bulk, through methods that serve as an alternative to pipelines, such as road transport.

The consultation and the public hearing aim to adapt distribution rules, in order to include significant technological innovations in the sector, as well as changes in the structure of the natural gas market in Brazil, resulting from the New Gas Law. The new draft will seek to offer, for example, flexible alternatives for the development of small-scale LNG projects, especially in regions lacking pipeline infrastructure.

Additionally, the new draft provides that biomethane, whose specifications were determined under ANP Regulations, will receive equal treatment to natural gas, as provided for in the New Gas Law. As expected by ANP, this clarification will contribute to minimize regulatory uncertainties and, consequently, encourage the development of the biomethane sector in Brazil. 

The proposal also focuses on adjusting technical requirements and applicable safety criteria, providing for multimodal integration and aligning the trading of natural gas in liquefied form with ANP Resolution No. 52/2011, which already regulates the matter.

The amendment to the original draft depends on the technical and legal analysis of the Federal Attorney General’s Office with the ANP, in addition to approval by the Collegiate Board.

Click here to access Public Consultation No. 1/2023.

ANP publishes dashboard with information about producing fields

On January 16, 2023, ANP published the Dynamic Dashboard of Fields under Development and Production. The dashboard provides the number of areas and information regarding company interest, operator, basin, environment, among others.

Click here to access the Dynamic Dashboard of Fields under Development and Production.

ANP Public Consultation: Regulatory Impact Analysis Report on regulation of biofuel producers

On January 26, 2023, ANP approved a public consultation on the Preliminary Regulatory Impact Analysis Report (“RIA”), which provides for the revision of ANP Resolution No. 734/2018.

The revised regulation consolidated the regulatory framework for the production of biofuels, impacting both the authorization to carry out this production activity and the granting of operating permits for production facilities.

In order to achieve this goal, ANP proposes the following regulatory options within the scope of the Preliminary Regulatory Impact Analysis Report: 

• To require a study on the management of changes before implementing changes to the production facility.
• To require a Fire Department Inspection Certificate (“AVCB”) from all ethanol producers, setting a maximum term for facilities that do not hold the certificate to comply with such requirement (proposed as a transitional provision in the resolution).
• To require a minimum storage capacity amount for liquid biofuels producers, which includes storage capacity equivalent to three days of the facility’s fuel production.
• To establish criteria for revoking the operation authorization in case the production facility exceeds two years without effective biofuel production.

Click here to access Public Consultation No. 3/2023.

NEWS

World’s First Green Hydrogen Auction

At the end of 2022, Germany launched the first auction for green hydrogen derivatives contracts (ammonia, methanol, and sustainable aviation fuel). This initiative is part of the H2Global policy for long-term contracts for derivatives produced outside Europe.

The auction is an accomplishment of the German incentive policy, which invested EUR 900 million in order to intermediate and subsidize the difference between derivative import contracts and the contracts with industries that will purchase green hydrogen.

Among the regulations guiding the auction is the requirement that the energy purchased must be exclusively renewable. In addition, ammonia production must reduce CO2 equivalent emissions by at least 73%.

Ahead of the first green hydrogen auction, Brazilian companies are paying attention to the German government’s actions, in order to enable renewable energy projects in Brazilian ports.

The date of submission for the first bidding round will be February 07, for green ammonia, and the bidding rounds for methanol and sustainable aviation fuel will be held until February 21.

Click here for more information.

Green Hydrogen Pilot Project in Brazil

With an investment of BRL 42 million, EDP Brasil aims to produce green hydrogen in its new generation unit in Ceará. Introduced on January 19, 2023, the unit includes a solar plant and has a favorable location for outflow to the international market.

The plant is one of EDP Brasil’s efforts towards the decarbonization of the procedures of the company’s coal thermal power plant, located a few meters away from the green energy generation unit. Hydrogen is expected to improve energy efficiency when used in co-flaring, on an experimental scale, with diesel oil and mineral coal. Accordingly, considering the impact of co-flaring, the initiative is characterized as a Research & Development (R&D) project, as stated by the company’s CEO.

The international market became an important goal for executives, due to the subsidies offered by the United States and Europe, in addition to Brazil’s great production potential, which would contribute to the supply of the domestic market, while a large portion of the surplus would still be exported. In addition, EDP Brasil is interested in participating in the Green Hydrogen auction, held in Germany.

Click here to read the full article.

Expansion of renewable sources in Brazil

In January 2023, distributed generation (DG) amounted to 17GW of the total installed generation capacity in Brazil, which represents more than 8% of such capacity.

In 2022 alone, there was a 6,979 MW increase in installed capacity from renewable sources (such as wind, solar, biomass and hydropower). The largest part of this increase came from wind power plants, which added 35% of capacity to the system.

Read in full – Report

EPE opens Public Consultation to improve market model to micro and mini distributed generation

On January 06, 2023, the Brazilian Energy Research Company (“EPE”) opened a Public Consultation to obtain contributions to improve the Market Model for Micro and Mini Distributed Generation (“4MD”).

The 4MD was developed by the EPE with the purpose of publicizing micro and mini distributed generation (“MMGD”) in Brazil. The model was applied by ANEEL in their studies regarding the regulation of MMGD in Brazil.

Due to the significance of the topic and the increasing expansion of the distributed generation market, EPE published Technical Note No. 017/2022, which introduces a discussion regarding limitations and potential improvements to the 4MD.

Contributions to the Public Consultation can be submitted by February 10, 2022 to the e-mail contato.4md@epe.gov.br.

Read in full – Public Consultation

Read in full – Technical Note No. 017/2022 

Hydropower plants across Brazil open gates to distribute water

Due to rain accumulation above average in early 2023, hydropower plants across numerous regions in Brazil have opened watergates in order to distribute excess water from reservoirs.

According to the MME, water accumulation amounted to more than 60% of the total capacity of reservoirs in January 2023. As such, the opening of the gates must be carried out in order to:

• secure the structural integrity of the dams; and
• reduce power consumption, whose surge is expected in January.

Read in full

OPPORTUNITIES

** Please note that the deadlines in the table above are constantly changing, so they correspond to deadlines disclosed at the time of publication of this newsletter.

WHAT’S NEXT

	December/2022 – existing Energy Auction “A-1” and “A-2 Notice: Published on 10/25/2022 more information here
	July/2023 – Auction for Contracting Reserve Capacity To be held by ANEEL.
	August 2023 – New Existing Energy Auctions “A-4” and “A-6” To be held by ANEEL.
	October/2023 – Auction for Supply of Isolated Systems To be held by ANEEL.
	November/2023 – Auction for Contracting Reserve Capacity To be held by ANEEL.
	December/2023 – New Energy Auctions “A-1” and “A-2″ To be held by ANEEL.
	July/2024 – Auction for Contracting Reserve Capacity To be held by ANEEL.
	August 2024 – New Existing Energy Auctions “A-4” and “A-6” To be held by ANEEL.
	October/2024 – Auction for Supply of Isolated Systems To be held by ANEEL.
	November/2024 – Auction for Contracting Reserve Capacity To be held by ANEEL.
	December/2024 – New Energy Auctions “A-1” and “A-2″ To be held by ANEEL.
	July/2025 – Auction for Contracting Reserve Capacity To be held by ANEEL.
	August 2025 – New Existing Energy Auctions “A-4” and “A-6” To be held by ANEEL.
	October/2025 – Auction for Supply of Isolated Systems To be held by ANEEL.
	November/2025 – Auction for Contracting Reserve Capacity To be held by ANEEL.
	December/2025 – New Energy Auctions “A-1” and “A-2″ To be held by ANEEL.