Brazil City Gas Distribution Market - Growth, Trends, and Forecasts (2022 - 2027)

Brazil City Gas Distribution Market - Growth, Trends, and Forecasts (2022 - 2027)

The Brazilian city gas distribution market is estimated to register a CAGR of more than 2% during the forecast period. The outbreak of the COVID-19 pandemic in Q1 of 2020 negatively impacted the market. Lockdown restrictions imposed by the Brazilian government to stop the spread of COVID-19 infections in the country caused a drop in the consumption of natural gas fuels as the restrictions imposed limited the movement of vehicles that directly impacted the market in Brazil. Factors such as the rising demand for natural gas as a clean fuel and the properties of emitting low carbon particles than coal and oil, city gas has a tremendous potential to reduce the growing carbon emission. This is expected to drive the growth of the market. However, Brazil's shift towards renewables for electricity generation, increasing use of biofuels for transportation and the growing sale of electric vehicles are likely to resist the growth possessing a huge threat to the City Gas Distribution market in the coming years.

Key Highlights

• The growing demand for natural gas from end users, including transportation, industrial, power, residential and commercial applications, is expected to drive Brazil's city gas distribution market during the forecast period.
• Further, the CNG to power project is likely to provide a vast market for the city das distribution players. Additionally, the rapid urbanization in Brazil is expected to create considerable opportunities for the city gas distribution market in the coming years.
• The increasing adoption of renewable fuels in the transportation sector is expected to restrain the market growth during the forecast period.

Key Market TrendsGrowing Demand for Natural Gas To Drive the Market

• Natural gas favors greater durability for various applications and reduces environmental impacts. It can be used in domestic, industrial, and automotive applications, replacing gasoline, ethanol, and diesel oil and as a clean source for electricity generation.
• In Brazil, the natural gas demand has witnessed considerable growth in recent years. In 2021, the total natural gas consumption in the country reached 40.4 billion cubic meters (BCM), recording about 29% growth compared to 2020 and 13% in 2019. This rise in demand is due to the increase in natural gas consumption as fuel in end-use applications. This, in turn, is likely to increase the demand for city gas distribution in the coming years, as gas distribution networks are essential for gas transportation in the city.
• Further, according to ABEGÁS (Brazilian Association of Piped Gas Distributors), the Natural gas consumption in Brazil grew by 28.82% in 2021, compared to 2020, with a recovery in industrial demand, which already exceeds pre-pandemic levels. In 2021, the thermoelectric sector consumed 44.7% of the natural gas in Brazil, followed by the industrial sectors (38.66%), vehicular (7.80%), residential (1.88%), commercial (1.03%) and remaining others.
• Further, the country is witnessing notable investments in natural gas-based thermoelectric projects, which are expected to create an opportunity for gas distribution networks. For instance, in early 2022, Diamante Geração de Energia announced the creation of a joint venture with Nebras Power, a subsidiary of Qatar Electricity & Water Company (QWEC), for investments that could reach about BRL 5 billion in two natural gas thermoelectric projects in Santa Catarina.
• The first initiative foresees the construction of the Norte Catarinense Thermoelectric Power Plant, a project purchased from Engie, with a power of 600 MW and investments of up to BRL 3 billion. Further, the second concerns a generating unit of 440 MW, which is planned to be installed inside the Jorge Lacerda thermoelectric plant, with an investment of up to BRL 2 billion. Such investments in natural gas thermoelectric plants are expected to increase the demand for natural gas and support the growth of the Brazilian city gas distribution market during the forecast period.

Increasing Adoption of Biofuel in Transportation Sector to Restrain the Market

• Brazil is among the largest consumers of biodiesel across the globe. According to the USDA Foreign Agricultural Service, biodiesel consumption has increased rapidly in Brazil, from 2.6 billion litres in 2011 to about 6.9 billion litres in 2021.
• In addition, rising technological development in the automotive industry and the growing production of biodiesel have given rise to the development of biodiesel-fuelled engines. Brazil has one of the largest fleets of biofuel-powered vehicles. This is likely to raise the demand for biodiesel-powered heavy vehicles, which in turn is expected to restrain the growth of the city gas distribution market in the coming years.
• The domestic consumption of biodiesel remains highly regulated by the Brazilian government. It is a function of two variables, including the mandatory biodiesel blend rate and the overall diesel consumption.
• Further, there are two primary policies, the National Alcohol Program and the Brazilian Biodiesel Production Use Program (PNPB), that focus on the consumption and production of biofuels in the nation. Under the National Alcohol Program, to make the nation less dependent on oil imports, the country focuses on producing hydrous ethanol dedicated to vehicles driving the consumption of biofuels.
• Similarly, the Brazilian Biodiesel Production and Use Program (PNPB) focuses on the federal implementation of biodiesel production and use. The diesel oil sold to consumers contains a certain percentage of biodiesel imposed by the law, which is expected to increase the demand for biodiesel, restraining the growth of natural gas-based vehicles.
• Therefore, with the abovementioned factors, the increasing adoption of biofuel in the transportation sector is expected to limit the growth of the city gas distribution market during the forecast period.

Competitive Landscape

The Brazilian city gas distribution market is partially consolidated. The key players in the market include Petroleo Brasileiro S.A., Companhia de Gás de São Paulo (Comgás), Ipiranga, Naturgy Energy Group S.A. and Bahia Gas Company (Bahiagas).

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