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Brazil’s Petrobras to give natural gas contracts tied to U.S. benchmark

The logo of Brazil’s articulate-scurry Petrobras oil company is considered at its headquarters in Rio de Janeiro, Brazil October 16, 2019. REUTERS/Sergio Moraes

Brazilian articulate-controlled oil producer Petroleo Brasileiro SA (PETR4.SA) talked about on Monday this would possibly occasionally well perchance add the U.S. natural gas pricing benchmark as an possibility to future gross sales contracts with distributors.

The glide comes as Latin The usa’s finest oil and gas producer tries to stimulate local request for its rising natural gas production and because the authorities strives to decrease home natural gas prices.

Petrobras, as the Rio de Janeiro company is idea, will originate providing contracts backed by the U.S. Henry Hub reference designate, as successfully as to contracts listed to the worldwide Brent oil benchmark, the corporate talked about in a observation.

Henry Hub index pricing will meet client request for a more stable and predictable benchmark, it talked about.

“Henry Hub is terribly low-designate and is much less unstable than other benchmarks,” talked about Jason Feer, world head of Industry Intelligence at advisory agency Poten & Companions. “The risk for Petrobras would be shopping or producing gas in a more costly and unstable index, but selling for a inexpensive one.”

Petrobras targets to decrease designate volatility in Brazil for natural gas – largely historical for cooking and energy generation – whereas aligning with global prices. The contemporary system must soundless be negotiated with possibilities, Petrobras talked about.

In February, President Jair Bolsonaro fired then Petrobras Chief Executive Officer Roberto Castello Branco over a dispute on pricing. Bolsonaro has promised to decrease gas charges for patrons.

Henry Hub is the pricing level for natural gas futures on the New York Mercantile Change. It moreover performs a perform in environment prices for U.S. liquefied natural gas (LNG) initiatives.

It has traded between $1.50 to $3.30 per million British thermal objects (mmBTU) in the previous yr.

Petrobras will use Henry Hub index prices in public requires local gas distributors, alone or as piece of hybrid HH-Brent contracts, it talked about.

“The natural gas market in Brazil is in the process of opening up, encouraging competition,” Petrobras talked about in a observation. The changes will enable possibilities to greater manage gas buying portfolios via index pricing and contractual terms, it talked about.

The portfolio of contracts equipped will enable possibilities to meet seasonal consumption with more versatile contract lengths, from six months to four years, the corporate talked about.

Our Requirements: The Thomson Reuters Belief Options.

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