Gas in the energy matrix in Brazil


Bruno Armbrust,
The gas sector has been growing year by year in Brazil and Latin America and today Grupo Gás Natural – the technical operator of CEG and CEG RIO – is the leader in the distribution of gas in the region, serving more than 5 million customers, says Bruno Armbrust, president of CEG.

Please give us an overview of the gas sector in Latin America, more specifically in Brazil.
The gas sector in this region has been growing year by year and today Grupo Gás Natural – the technical operator of CEG and CEG RIO – is the leader in the distribution of gas in Latin America, serving more than 5 million customers. This growth has resulted from investments that are being made in this region, with Brazil in particular being a country with very attractive characteristics for investors.

We are living at a time in which the demand growth has not been matched with the production of natural gas. Last year, for instance, the south and southeast regions of Brazil faced some difficulties as a consequence of several factors, among them the stagnation of natural gas production in Bolivia and Argentina.

But I am optimist and I believe that such passing difficulties will be overcome. Without doubt the gas market is very promising in Latin America, particularly in Brazil, taking into consideration the recent discoveries of natural gas reserves and investments in infrastructure foreseen in the government’s Growth Acceleration Program.

Please give a brief history and a current overview of CEG.
Companhia Distribuidora de Gás do Rio de Janeiro – CEG – is a company with a history of over 150 years, whose path is intertwined with the history of the city of Rio de Janeiro. The company was established by the Baron of Mauá in 1854, and has undergone several phases, among them the production of gas by means of coal and naphtha. For a considerable period CEG distributed manufactured gas, but currently operates with natural gas only, thanks to conversions carried out from 1998 to 2007, in more than 470,000 residences in Rio de Janeiro.

In 1997, CEG was privatized and started to be operated by Grupo Gas Natural, a multinational company headquartered in Spain and considered one of the major players of the sector. The Group now has 10 years of management experience, not only at CEG, but also at CEG RIO, which is responsible for the distribution of gas in the interior of the State of Rio de Janeiro, Gás Natural São Paulo Sul, the gas distribution company in the region of São Paulo, and Gás Natural Serviços, which acts in the rendering of non-regulated services.

Those companies serve more than 733,000 customers in 50 municipalities – 33 in Rio de Janeiro and 17 in São Paulo.

The services provided by Gás Natural Serviços are in the area of compression for natural gas vehicle (NGV) filling stations, compressed natural gas (CNG) systems, acclimatization and co-generation.

Tell us a little bit about your background.
All my professional life has been spent in the gas sector. I joined CEG in 1984 and have occupied a series of roles that have contributed significantly to my professional development, among them Distribution Manager, Technical Director, New Business Planning and Development Director, and Commercial Director.

With the beginning of Grupo Gas Natural’s management in 1997, a series of new challenges were introduced and I am proud to have participated actively in a number of important projects, such as the expansion of gas networks into new municipal districts, the development of the natural gas vehicle market, and acclimatization and gas thermoelectric generation.

In 2004, I was invited by Grupo Gás Natural to direct its branch in Italy. This was a major experience in a market quite different from the Brazilian one, as it is an open market subject to strong competition and with many gas offerings, whether by gas pipeline or liquefied natural gas (LNG) plants. In Italy, we initiated the licensing process of two regasification terminals in an environment with strong and independent regulation, and we were ranked among the 10 largest local distributors.

Last year, I came back to Brazil and have come upon a different scenario, but likewise promising.

What metering and billing systems does CEG have?
We have developed a corporate system for each segment – residential, industrial and commercial, and NGV. There is a specific one called telemetry for the NGV filling stations, in which we carry out the daily remote reading (through SMS).

What are the main challenges that CEG faces?
We experience the daily challenge of further increasing the quality of our services. We are a utility company that participates in the to day-to-day life of people, whether through gas that reaches their dwelling places for the stove and heaters or through gas supplied for industries, traders and  NGV filling stations.

One of our challenges is to improve the conditions of the distribution network. With CEG being more than 150 years old there are areas in the city where the underground network is very old. In the last 10 years, we have succeeded in considerably enhancing the distribution system safety with the exchange of over 500 km of underground piping. Our goal is to renew the other 500 km in the next five years, thus completing the renewal of the entire old network.

Another big challenge is to raise the perception of our customers about the need to have gas devices properly installed and to carry out a periodic maintenance – at least every four years – of installations and devices. We have been planning a series of actions aimed at increasing safety in the use of natural gas. It is necessary to develop a wider culture, and we try to do this every day through our different relationship channels with our customers.

Is meter tampering/gas theft a problem and how does CEG deal with this?
This is an issue that all utility companies face and it brings losses not only for the companies but for society as well. Last year, we supported the initiative of the Commercial Association of Rio de Janeiro, which organized the creation of a group with representatives from each company.

All this encouraged us to design a system to detect anomalies in measurement aimed at the technical normalization and recovery of income in the metering systems of residential, commercial, industrial and NGV customers. It is necessary to understand that in the case of gas, in addition to the loss of income and consequent impact on gas rates, the theft may also interfere in the safety of the distribution system, as the improper handling of the network or gauges may cause leakage.

In this work we have the strong support of the Delegacia de Defesa dos Serviços Delegados (DDSD), which makes available inspectors and experts to follow the inspections carried out by us. This joint interaction with the DDSD is fundamental to validate the whole operation, to guarantee the safety and physical integrity of our employees during these inspections, and to further ensure the application of legal penalties.

Each year this work is being improved and bringing increasingly better results. Thereby, we guarantee the quality and reliability in the metering, thus reducing the loss of non-measured gas.

What customer outreach activities does CEG undertake?
Not only CEG but also CEG RIO is strongly performing in the municipalities of the concession area as well. The two companies are present in 33 municipalities. In practice, the commercial teams study the areas of the municipal district with supply feasibility and then they verify the residential interest. In the case of interest, the company executes the entire work required to begin the supply.

It is not an easy work, since in some of the regions natural gas is something new that is not present in the people’s culture. But gradually we will carry on contributing to a change of this scenario.
Is submetering important for CEG?
We operate with individual measurement systems, which represent a number of benefits not only for us as utility concessionaire, but for our customers as well.
When a customer has a meter and receives his/her own bill, he/she may get in touch with our customer service and technical assistance channels to obtain information and order services. They can better control their expenses and carry out repairs in gas installation, hiring the professional or company directly.

What new projects are under way?
A remote measurement system with simultaneous printing of the invoice during the reading for industrial customers, the substitution of obsolete meters, and control of meters.

What is the potential for other technologies such as prepayment, AMR and AMI in the measurement of gas in Brazil and Latin America?
There is a worldwide trend towards the use of these systems of electronic measurement. We are following this evolution and investing in solutions that protect our incomes, reduce out costs, and assure our customers’ quality of service.

Not only in Brazil but in Latin America as well, Grupo Gás Natural has been studying the best way to integrate its systems, thus aiming at a single communication platform to enable us to face the new challenges of our business with a certain advantage. Our short-term strategy is to design a smart network in which we will have online access, in real time, to the devices that measure and control our network, mainly of the large customers, in order to minimize costs, explore new business and win new customers.

Is there potential to integrate gas metering with other services (light and water)?
I imagine so, but the problem of different computer systems is the highest barrier to overcome, as each utility concessionaire has its own system, with quite different characteristics. There are companies that operate with collective measurement systems, what makes difficult the execution of a project of this nature.

Another point to be overcome is the manner of reading and invoicing, which also differs from company to company.

But we could promote meetings with other concessionaires in order to identify the possible solutions for these differences and to evaluate their feasibility. It is necessary to have in mind that any efficiency gain generates – in the medium and long terms – a positive impact on the rate, and in this case, there would be a cost reduction in an integrated operation.

What is the potential for gas to contribute to sustainable energy delivery in Brazil and in Latin America?
In Brazil and all over the world, natural gas is gaining increasingly greater participation in the generation of electric power. Notwithstanding this it is worth emphasizing that it is more efficient to invest in co-generation systems and gas acclimatization in which an efficiency of 85 percent is obtained, than to invest in gas thermal generation and then to transport the electric power in the distribution and transportation network to feed home appliances and obtain an efficiency around 30 percent.

We are living in a time when efforts are necessary for environmental preservation and natural gas may give an enormous contribution. Of all fossil fuels, it is the one that generates least greenhouse gases. For example, last year Grupo Gás Natural managed to register a Clean Development Mechanism (CDM) project when Indústria Quinvale replaced the use of fuel oil with natural gas. With the use of natural gas in its production processes, those industries will achieve savings of 12,890 tons of carbon dioxide per year, generating a substantial reduction in the emission of greenhouse gases.

The investments made in the past years have allowed a stronger presence of natural gas in the energy matrix of the State of Rio de Janeiro, which has brought a series of social, economic and environmental benefits, above all.
For example, with the growth in the use of natural gas, mainly by industry, we have managed to reduce by 94 percent the use of fuel oil, which is the one that most emits pollutants and greenhouse gases.

CEG is a host utility for Metering, Billing/CRM Latin America 2006 taking placein Rio de Janeiro  from August 11-13, 2008.