The Brazilian oil and gas industry is pushing for a natural gas protagonism in the country’s path to energy transition. Recognizing the current lack of a robust domestic gas infrastructure, executives in the refined products complex claimed in a recent energy event that its supply flexibility could allow for a smooth alternative amid the current distribution instability of other more popular “greener” sources, such as solar and wind.

“The strategic implementation of natural gas allows not only for supply security, but also significantly contributes to the reduction of greenhouse gas emissions,” wrote Brazilian Oil and Gas Institute president Roberto Furian Ardenghy in a statement to Platts, part of S&P Global Commodity Insights.

Renewable sources — including domestic production and imports — accounted for 88% of Brazil’s total power supply in 2024, according to a 2025 report by Brazil’s Energy Research Office, or EPE. Hydro energy was the country’s leading source (55.3%), followed by wind (14.1%), solar (9.3%), natural gas (6.3%), and sugarcane biomass (4.9%) as the top five sources.

Brazil’s renewable energy operators face moments of oversupply in a grid unable to accommodate the extra generation, leading to curtailment, said energy executives during the 2025 Sergipe Oil and Gas conference, an issue also seen in other countries with wind and solar supplies. Much of Brazil’s wind power is also generated in the Northeast, making it more expensive when it reaches the country’s center and southern regions, where hydro and thermal power are more common.
Gas industry leaders argue that wind and solar power depend on weather conditions, and the lack of proper domestic structure — such as storage — leads to irregular supply and price fluctuations.

During the domestic dry season, gas-powered thermal energy is already used in addition to hydro to meet supply. Now, oil executives are pushing to expand that as an alternative to diesel, coal, refinery gas, fuel oil and others, such as tar, to complement renewable energy supply.

Brazil’s current leading power-generating capacity comes from solar energy, followed by hydro, thermal, wind, and small-scale hydro plants as the five main generators, according to data from Brazil’s National Electric Energy Agency, or Aneel. Of those, hydro plants are the ones currently more in use (48.52% of capacity), followed by thermal (22.99%), wind (15.90%), solar (8.45%) and small-scale hydro (2.78%), according to data retrieved July 29.

The country’s thermal capacity is mostly fueled by fossil fuels (63.74%), with natural gas on the lead, followed by sugarcane biomass and diesel, according to Aneel data. Coal and fuel oil are the fifth and sixth most used fuels, respectively.

“The expectation of the increment of renewable energy sources in the next decade is very aggressive. Brazil will need flexible solutions to its solar and wind energy supply, for example,” said Anderson Bastos, gas storage director at Origem Energia, during a panel. “Gas storage allied with gas-powered thermoelectrical plants will help renewable energy insertion in the market.”

Brazil currently has no natural gas storage unit, Bastos said. State-controlled company Petrobras, along with private refiner Brava Energia and gas company GBS Storage, are eyeing the Manati gas field, located in the state of Bahia, as a potential storage site. Executives of Brava and GBS have recently told the local media that gas production in Manati is expected to end between 2027 and 2028, creating an opportunity for building such storage capacity.

Brazilian electrical energy demand is projected to increase an average 3.7% annually between 2024 and 2029, according to a 2024 report by the country’s National Electrical System Operator, or ONS.

Commodity Insights analyst João Lopes sees the substitution of diesel and fuel oil for gas as a natural domestic industry movement in the medium to long term. “It just won’t happen faster because Brazil lacks the infrastructure to transport natural gas to its thermal power plants,” he said. “The diesel and fuel oil market share for electrical power generation or as industrial fuel will likely decrease over time due to this substitution, but in the short term, there will be little impact on refiners in terms of volume.”

Lopes added that much of the diesel used in electrical power supply is in isolated systems. Such systems could use natural gas if they were to be connected to the national electrical grid, he said. But as they remain independent, their energy supply will more likely be substituted by renewable alternatives.

Fossil fuels still predominant in domestic transport

Fossil fuels are still predominant in domestic transportation, according to industry experts. An FGV Energia analysis of EPE data showed diesel accounted for 43.4% of transport energy demand in 2023, followed by gasoline (27.8%), hydrous ethanol (17.3%), biodiesel (5%), aviation gasoline (4%), natural gas (1.8%), fuel oil (0.8%) and electricity (0.2%).

The transport sector accounted for 62% of the total refined products consumption in 2024, according to a 2025 EPE report, with a 0.6% increase in diesel demand year on year. Gasoline consumption fell by 4% in 2024 compared with 2023 as the fuel disputed national drivers’ preferences with hydrous ethanol.

Ethanol’s market share has remained strong in 2025, but a decrease in gasoline prices in 2025 and 2026 could mean a stronger demand for gasoline, S&P Global Commodity Insights’ analysts said in their July 2025 Latin America Short-term Outlook report(opens in a new tab).

While executives and industry experts see a potential for natural gas in the transportation market, they say Brazil currently does not have a robust pipeline or gas station structure to make the fossil fuel a viable retail alternative.

“We have the product. We need to develop the market,” said Glauco Campos, general manager for fuel origination and trading at gas company Eneva, during another 2025 Sergipe Oil and Gas panel.
Source: Platts