Brazil: Natural Gas is for Power, not Vehicles; State of Rio de Janeiro Disagrees
19 May 2005
Brazil’s Ministry of Mines and Energy (MME) is submitting a regulatory bill to Congress that will put a priority on the use of natural gas in industry and for thermoelectric power generation.
MME intends for the government to provide no incentives for the use of natural gas in vehicles (VNG), except for public transport in city centers to reduce pollution and CO2 emissions. For the majority of vehicles, the government will emphasize the use of ethanol and now biodiesel.
Brazil wants to guarantee gas supply to power plants to ensure they can generate power at peak times and when water levels at hydroelectric plant reservoirs are depleted to avoid power shortages, as occurred in 2001.
According to the EIA, hydroelectricity accounted for 83% of Brazil’s installed capacity in 2002. Thermal (oil, natural gas and coal) accounted for 10% of Brazil’s installed capacity in 2002, followed by renewables with 4% and nuclear with 3%. The country is emphasizing bringing new thermoelectric generating plants online, mainly new natural gas-fired power plants.
For years, natural gas demand in Brazil grew steadily, but in line with growth in production. From 1999 to 2003, however, demand grew at a compound annual rate of 22%, more than doubling consumption, even with the energy crisis in 2001.
Currently, according to BNamericas, vehicular use of CNG is one of the fastest growing demand sectors for natural gas, driven by prices well below those of gasoline. In São Paulo, Comgas posted total gas sales growth of 11.5% in 2004 from 2003. CNG sales growth for vehicles was 23.9%.
In Rio de Janeiro state, where 40% of the country’s 898,000 VNG fleet circulates, CEG’s VNG sales grew 15% from 2004-2003, while industrial sales rose 1.6%.
The state government of Rio de Janeiro recently granted tax incentives for individuals or companies who convert their vehicles to run on CNG, a policy clearly in conflict with the stated intention of the federal MME.
The [Rio de Janeiro] energy secretary Wagner Victer slammed the government’s decision not to give incentives to VNG sales in a statement published on Thursday.
Victer called the federal government irresponsible and said the lack of regulations and a clear energy policy could cause supply problems in the country.
He called for the speeding up of regulations, the development of the Santos basin gas reserves, the construction of a gas pipeline network, fast tracking alternative energy incentive programs and concluding Angra III, the country’s third nuclear reactor.
Victer reaffirmed the Rio de Janeiro government’s intention to continue giving tax incentives for the use of VNG.
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