Natural gas importers in Brazil are prospecting possible extra purchases until the first quarter of next year, as persistently dry weather threatens hydroelectric power generation.
The country will need five or more shipments of liquefied natural gas (LNG) per month from January until at least the end of March to fill gaps in energy supplies, according to traders with knowledge of the negotiations. Discussions about possible deliveries in early 2025 are still preliminary and shipments have not yet been contracted, they said.
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Latin America’s largest economy is experiencing its worst drought in 40 years, forcing the country that normally relies mainly on hydroelectric power to burn more gas to generate electricity. The forecast for below-average precipitation in the coming months means that rainfall will likely not be enough to replenish reservoirs.
As LNG imports from Brazil have increased since Augustshow ship tracking data from Bloomberg. Because dam volumes can change quickly, the country typically resorts to off-the-shelf LNG purchases. spotrather than the more predictable long-term contracts preferred by buyers in Asia and Europe.
Brazil’s increased demand will come at a time when competition for shipments increases to meet heating needs in the Northern Hemisphere. Egypt has also emerged this year as a contender for spot LNG purchases in the winter months due to declining domestic production and higher consumption.
Electricity from plants burning gas, coal or other fuels in Brazil this month reached the highest level since December 2021, when a severe drought forced the country to buy record volumes of LNG. Last month, imports of the fuel also jumped to their highest level since, ship tracking data compiled by Bloomberg shows. So far in October, Brazil has imported seven LNG shipments, according to ship data.
Highlighting the trend, an LNG ship carrying US cargo diverted from Europe to Brazil last weekend. The SM Albatross initially set course for Eemshaven, in the Netherlands, before diverting to Salvador, Brazil, where it is expected to arrive next Monday.
A Petrobras is the largest buyer of LNG in Brazil. Among private companies, the American Excelerate it has already imported the fuel through a floating terminal leased from Petrobras in the northeastern port city of Salvador and sold the gas to its customers in Brazil, but no longer sells gas after the terminals. In January, Petrobras signed a 10-year agreement to lease the floating terminal from Excelerate.
A Açu Natural Gasone joint venture between BP, Prumo Logística of EIG Global Energy Partners, Siemens and SPIC Brasil, receives shipments at the port of Açu, around 300 kilometers northeast of Rio de Janeiro, for its nearby thermoelectric plants.
Petrobras declined to comment. Excelerate said in an emailed statement that “LNG continues to serve as a reliable support for Brazil’s dependence on hydroelectric power and other intermittent sources,” without providing details about purchases. Gás Natural Açu did not immediately respond to requests for comment.
In the coming months, conditions in parts of southern Brazil and northern Argentina will be dry, according to the MetDesk forecast.
“It’s already been pretty dry the last few months,” said Ben Davis, energy forecaster at MetDesk, during a webinar last week, referring to southern Brazil, where most of the densely populated areas are located. “We expect more dry anomalies generally during the Northern Hemisphere winter.”
Brazil’s grid operator, known as ONS, forecasts a continued reduction in reservoir levels over the next three months, with a recovery in volumes estimated to begin in January. It predicts uncertainty regarding the start and conditions of the rainy season. Although some models indicate an increase in rainfall from the second half of October, levels are expected to remain below the historical average.
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