This presentation by Vinicius Carvalho, Professor (University of São Paulo and former President, CADE, Brazil) was made during the discussion “Market Definition in the Oil and Gas Sector” held for competition authorities officials on 27 September 2022. More materials on the topic can be found at https://www.oecd.org/competition/latinamerica. This presentation was uploaded with the author’s consent.

1. Market Definition In the Oil & Gas
Sector
Brazil
Vinicius Marques de Carvalho
Professor at University of São Paulo

2. OIL SUPPLY CHAIN IN BRAZIL
UPSTREAM MIDSTREAM DOWNSTREAM
Processing (Refineries,
Petrochemicals and
Others)
Offshore
Onshore
Terminals
Cabotage, import
and export of oil
Industries
Individual
Consumers
Resale
Cabotage, import
and export of oil
Terminals
Distribution

3. Upstream  Oil extraction and production
• Relevant geographic market definition: national
• Competitive pressure from imports, although Brazilian oil import volume is currently decreasing
Midstream  Oil refinement
• Relevant geographic market definition: regional
• Specific mix of fuels (gasoline, jet fuel, diesel) may impact the competition dynamic
• The installed capacity by a specific region compared to its volume of demand may lead to competition between
different regions
Downstream  Fuel resale and distribution
• Relevant geographic market definition:
o Resale: local
o Distribution: State
RELEVANT MARKET DEFINITION IN THE OIL SECTOR

4. Source: PUC’s Industrial Engineering Department

5. Cease and Desist Agreement
• Entered into between CADE and Petrobras in June 2019
• The proceeding launched by CADE aiming at investigating alleged anticompetitive practices carried out by
Petrobras was shelved given that the parties entered into an agreement
Main obligations set forth by the Cease and Desist Agreement
• Divestment of 8 out of 13 refineries owned by Petrobras together with their transportation assets:
o Refinaria Abreu e Lima (RNEST)
o Unidade de Industrialização de Xisto (SIX)
o Refinaria Landulpho Alves (RLAM)
o Refinaria Gabriel Passos (REGAP)
o Refinaria Presidente Getúlio Vargas (REPAR)
o Refinaria Alberto Pasqualini (REFAP)
o Refinaria Isaac Sabbá (REMAN)
o Lubrificantes e Derivados de Petróleo do Nordeste (LUBNOR)
CEASE AND DESIST AGREEMENT – CADE/PETROBRAS

6. GAS SUPPLY CHAIN IN BRAZIL
UPSTREAM MIDSTREAM DOWNSTREAM
Methane Tanker
Compression Station
Offshore
Onshore
Natural Gas Treatment
Unit
Residential
consumers
City Gate
Pipeline
Transport
Pipeline
Outflow
Road transport
Regasification
Terminal
Free
Consumers
Pipeline
Imports
Business consumers
Pipeline
Distribution
Industries and
Thermal Power
Plants

7. BRAZILIAN REGULATORY FRAMEWORK
The Brazilian Constitution
• Establishes that local piped gas services are responsibility of the States (legislative and service provision)  gas
distribution activity
New Regulatory Framework
• Law No. 14,134/2021 ("New Brazilian Gas Act")
• Decree No. 10,712/2021 ("New Regulatory Gas Decree")
Independence of transport system operator: companies undertaking the transportation of natural gas must not be in
control, controlled or affiliated with companies performing activities of exploration, development, production, importation,
shipment or commercialization of natural gas
Limitation related to the interference of vertically integrated companies: rules for (i) accessing distributors' sensitive
information and (ii) appointing directors and board members
Other relevant regulatory aspects:
• The prices charged by gas distributors are controlled
• As a rule, distributors cannot refuse to offer

8. Upstream  Gas extraction and production
• Relevant geographic market definition: national
Midstream  Gas transportation
• Relevant geographic market definition: Brazilian gas pipeline network
• Natural monopoly
Downstream  Gas distribution
• Relevant geographic market definition: CADE had defined the relevant market for gas distribution in different
ways:
o Concession area (natural monopoly) Captive consumers
o State-wide
o Regional
o National
RELEVANT MARKET DEFINITION IN THE GAS SECTOR
Free consumers

9. Commercialization of natural gas  purchase and sale of the natural gas molecule
• Commercialization is not a specific stage in the natural gas chain
Several players at different stages of the gas chain can commercialize natural gas:
• Gas distributors
• Gas producers
• Independent suppliers
The New Brazilian Gas Act provides two different consumers:
• Free consumer: purchase natural gas from any agent that carries out the activity of commercialization of natural gas
• Captive consumer: consumer that is served by the local piped gas distributor
Regulation and monitoring of sales contracts
• Brazilian National Agency for Petroleum, Natural Gas and Biofuels (“ANP”)
• Contracts for gas purchase are generally subject to regulatory approval, which also considers competition aspects
COMMERCIALIZATION OF NATURAL GAS

10. Cease and Desist Agreement
• Entered into between CADE and Petrobras in July 2019
• The proceedings launched by CADE aiming at investigating alleged anticompetitive practices carried out by
Petrobras were shelved given that the parties entered into an agreement
Main obligations set forth by the Cease and Desist Agreement
• Divestment of natural gas transporters owned by Petrobras:
o Nova Transportadora do Sudeste S.A.
o Transportadora Associada de Gás S.A.
o Transportadora Brasileira Gasoduto Bolívia-Brasil S.A.
• Divestment of the equity interests held by Gaspetro in 19 natural gas distributors
CEASE AND DESIST AGREEMENT – CADE/PETROBRAS

11. THANK YOU!