Shale gas: a priority in the energy agenda between US and Brazil

Equipe MJAB 11.02.20

Shale gas: a priority in the energy agenda between US and Brazil

 In early February the city of Rio de Janeiro held the first Energy Forum between Brazil and US with the presence of the Minister for Mining and Energy, Mr. Bento Albuquerque and the US Energy Secretary, Mr. Dan Brouillete. The purpose of the meetings was to strength the cooperation between the two countries in the energy field.

In the context of the meetings, Mr. Albuquerque has publicly stated that the shale gas is one of the focal points of the cooperation between US and Brazil. According to Mr. Albuquerque, the US has performed a real revolution in the gas industry by using technology to increase the exploration and production of the shale gas. The shale gas is an unconventional hydrocarbon found in reservoirs with geological characteristics and locations different from those where oil and gas are usually produced.

According to the International Energy Agency (IEA), Brazil has one of the top 10 reserves of shale gas in the planet, with at least 6 trillion cubic meters to be explored. The exploration of this unconventional gas could not only improve the country’s gas production, but also reduce the dependence on the conventional sources and lower the prices for customers and the industry – one of the goals of the Bolsonaro administration.

Consequently, the cooperation with the US government would be a key aspect to unleash Brazil’s full potential in the sector, especially with regards to the creation of a legal framework inspired in the one which is currently being used in the US to facilitate the development of the unconventional gas exploration. We see this moment as a great opportunity to implement the legal certainty provided in the American model to the one to be established in Brazil.

The willingness of President Bolsonaro to advance the subject and the public support of the US are indications that the theme must be treated as a priority in the following years. However, some challenges must be faced.

To begin with, there is no specific law regulating the exploration of the shale gas and other unconventional gases in Brazil. More than that, the discussion of a legal framework must bring to the table discussions regarding the environmental impacts resulting from the hydraulic fracking process – which is used for the extraction of the shale gas. There are concerns that this process could result in the contamination of the soil and the groundwater table, reason why other countries such as France and Bulgaria have already banned the exploration through the hydraulic fracking technique.

In Brazil, there is a bill currently being discussed in Congress (Bill No. 1935/19) which prohibits the gas exploration by the hydraulic fracking of the soil. The bill was already approved in by the Committee of Constitution, Justice and Citizenship (CCJC), responsible for analyzing the constitutionality of the proposition. The bill will now be examined by the Commission of Environment and Sustainable Development to evaluate other technical aspects.

In the state level, there are already laws that prohibit the exploration of unconventional gases using the fracking technique in Paraná (Law No. 19.878/19) and Santa Catarina (Law No. 17.766/19), and others being discussed in states such as Ceará (Bill No. 113/19). In addition, some courts have already issued rulings prohibiting the exploration of unconventional gases by using the hydraulic fracking considering that there would be environmental risks related to the use of such technique.

In short, the agenda set by the Bolsonaro administration and the support of the US government, a leader in the development of the shale gas industry, indicate that the unconventional gas should arise as new industry in Brazil with huge potential. However, in order to become a reality, there must be an important role in educating and convincing the Congress in this direction, especially given the environmental issues involved.

Authors: Pedro Villas-Bôas e Bárbara Teles

Policy Monitor, Brazil-U.S. Business Council