Up to 3.5 million cubic meters per day of natural gas could leave long -term contracts to be negotiated on the Spot market in Brazil in 2025, according to a study published by Wood Mackenzie. This evolution stems from a strategic use of Take-Or-Pay flexibility clauses (TOP), allowing distributors to seize price opportunities between $ 5.9 and $ 10.5 per million British thermal (MMBTU).
This dynamic could redefine contractual relations on the Brazilian gas market, in particular for local distribution companies, known as the Local Distribution Companies (LDC). The SPOT market, historically perceived as an opportunistic lever, is now used as a viable alternative to firm commitments, according to Javier Toro, research director at Wood Mackenzie for gas and electricity in the south cone.
An expanding spot market
In 2024, more than 60 contracts were signed on the Spot market, representing a volume of 40 million cubic meters, mainly in the northeast region. These transactions were mainly concluded during the last week of each month, representing 41 % of monthly sales. Copergás, Cegás, Bahiagás and Scgás companies alone concentrated more than 95 % of the volumes exchanged.
-This repositioning has its origin in the stagnation of LDC demand, the progressive tilting of major industrial consumers to the free market, and the emergence of new trading platforms. The contractual clauses between top volumes and daily contractual quantity (DCQ) now make it possible to integrate spot volumes without incurring penalties.
Price evolution and competitive pressure
The report specifies that Petróleo Brasileiro SA (Petrobras), which currently provides 70 % of LDC gas, adjusts its pricing formulas. The prices applied to volumes exceeding the TOP thresholds could thus drop from 11.7 % to 10 % of the Brent value. This reduction contributes to reducing the gap with the prices of the SPOT market, even if the latter remain competitive in the face of the world’s fluctuations in Brent and the growing pressure exerted by new suppliers.
The diversification of the offer, associated with the appearance of new players on the market, has brought enhanced liquidity and introduces alternative commercial models. “If the current conditions are maintained, the year 2025 could mark a structural turning point in the management of portfolios of the Brazilian LDCs,” said Toro.
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