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MME opens for public consultation a proposal for new guidelines to update natural gas regulation in Brazil

Tax; Infrastructure and Energy
MME opens for public consultation a proposal for new guidelines to update natural gas regulation in Brazil 

On October 03, 2016, the Ministry of Mines and Energy (Ministério de Minas e Energia – "MME") opened for public consultation a proposal for new guidelines regarding natural gas regulation in Brazil (Gás para Crescer/Gas to Growth), which was prepared jointly by the MME, the Energy Research Company (Empresa de Pesquisa Energética – EPE) and the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (Agência Nacional do Petróleo, Gás Natural e Biocombustíveis – ANP).

The new guidelines seek to adjust the current regulations to a new market with multiple agents and discuss effective measures to improve industry standards targeting this new market, as well as increase competition among market players and access to information. It also seeks to encourage new and diverse players to access the natural gas markets.

The public consultation focuses on eight different topics and challenges, as follows: (i) marketing of natural gas; (ii)  tariff system; (iii) third party access to essential facilities; (iv) alignment between state and federal regulations; (v) alignment between natural gas regulation and operation and regulations for the power industry; (vi) creation of an integrated and independent system for the transportation of natural gas; (vii)  marketing policy for natural gas produced under the production sharing regime; and (viii) tax challenges.

One of the main highlights of the proposed guidelines is the creation of an independent system operator, which should be similar to the National Electric System Operator (Operador Nacional do Sistema Elétrico – "ONS"). This operator will promote decentralization and supervision of the natural gas industry. Similarly to the ONS, the operator will not own any assets, but will make decisions regarding necessary improvements and expansions, as applicable, in transmission assets owned by natural gas transporters.

Another key aspect of the new proposed guidelines includes challenges to the current State VAT tax (ICMS) and related invoicing structure, which were designed based on a convergence of physical and contractual flows. These tax challenges cover gas swap transactions, share of the regasification structure and liquefied natural gas loads and importation and interstate transactions involving natural gas. Please note that new rules for invoicing natural gas transactions are expected to be introduced by means of an interstate agreement, the so-called "Protocolo ICMS", whereby invoicing procedures would be based on the contractual flow of natural gas (regardless of its actual physical flow).

Stakeholders and industry players must submit their comments and suggestions by November 07, 2016 by filing an electronic form released by the MME on its website, which is available here for ease of reference.

​Please find here relevant public consultation documents, in Portuguese only, made available yesterday by the MME.
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