The Reservoir-to-Wire (R2W) Busines Model and its Role in the Energy Trilemma

The Reservoir-to-Wire (R2W) business model has played a pivotal role in addressing the energy trilemma, particularly in the context of Brazil’s natural gas market. This article highlights the remarkable achievements of the R2W model and its impact on the energy sector, emphasizing its potential to overcome challenges and create opportunities.

A decade ago, the focus of this article would have been on the immense potential of natural gas production in Brazil’s countryside, particularly in the Parnaiba Basin of the Northeastern State of Maranhão. The article would have delved into the valuable contributions this resource could make to the energy sector, including job creation, income generation, and competitive energy supply to underserved local communities and governments. However, thanks to the successful implementation of the concrete business case for the reservoir-to-wire model in Brazil, we no longer need to discuss potentials; we can now examine tangible results.

The reservoir-to-wire business model operates on an integrated approach where companies explore natural gas reserves and also own and sell the produced gas to their own thermal power plants (TPPs). Eneva, the largest player in implementing the R2W model in Brazil, has been at the forefront of developing and executing projects using this model. Eneva’s business case demonstrates the efficacy of this model in regions where demand is insufficient to support gas development through traditional means such as pipelines. In Maranhão, for instance, the region lacked economically viable pipeline infrastructure, but it was crisscrossed by electricity transmission lines, enabling the transmission of energy generated by TPPs fueled by local natural gas to the entire country.

As a result, Maranhão has produced an impressive 521,318.00 million cubic meters of natural gas in the last decade. During peak electricity demand, daily production can reach approximately 8.5 million cubic meters, equivalent to about 55% of Portugal’s average daily demand. This natural gas has powered 1.8 GW of installed capacity in thermal power plants, generating 64 TW of electricity over the past ten years, meeting the energy needs of households, industries, hospitals, and other consumers nationwide.

Moreover, the reservoir-to-wire model in Maranhão not only represents an innovation in the Brazilian energy sector but also serves as a compelling example of how the energy trilemma can be effectively addressed. The trilemma, as defined by the World Energy Council, encompasses three key criteria: energy security, energy equity, and environmental sustainability.

Natural gas TPPs, such as those developed by Eneva, provide reliable and accessible energy. These plants have been available to the system 96% of the time over the past five years and adhere to the highest standards of safety, both for people and the environment. Eneva’s competitive prices are attributed to the lower logistics costs associated with onshore natural gas production compared to other TPPs. Furthermore, TPPs fueled by onshore natural gas offer a cleaner alternative to meet energy demand, especially when compared to diesel or fuel oil-based TPPs, which still account for about 7 GW of installed capacity in Brazil’s integrated transmission system. Therefore, the role of R2W TPPs in ensuring energy security, providing reliability and affordability with lower environmental impact, showcases how the energy trilemma can be effectively addressed in practice.

Moreover, when evaluating this business case, it is crucial to consider the indirect effects, particularly in a country like Brazil that grapples with economic development challenges. Eneva’s investments of approximately US$ 2.5 billion in natural gas exploration, production, and electricity generation in Maranhão until the end of 2022 have made significant contributions. For instance, the company’s investment has led to a 12-fold increase in local municipality GDP within nine years.

In addition to the substantial impact on energy production and the energy trilemma, the reservoir-to-wire (R2W) model has also fostered social and economic development in Brazil. Through private social programs such as “ElasEmpreendedoras” and “ProjetoAgrícola Nova Demanda,” socially vulnerable families in Maranhão have received training on monetizing their food production, contributing to a circular economy that uplifts communities from subsistence living. This initiative has not only generated income but also facilitated better education and nature-based solutions. The program’s investments have directly benefited various individuals, including seamstresses, coconut collectors, family farmers, fishermen, and traditional African-Brazilian communities (‘quilombolas’), empowering them to leverage entrepreneurship for their own transformation.

The reservoir-to-wire business model operates on an integrated approach where companies explore natural gas reserves and own and sell the produced gas to their thermal power plants (TPPs)

Building upon the success in Maranhão, the R2W model has been expanded to the North Region of Brazil. An exemplary case is the “Azulão-Jaguatirica” operation, where natural gas from the Azulão Fields in Amazonas is transported via cryogenic trucks along a 1,100 km (about 700 miles) road to TPP Jaguatirica II in Roraima, the northernmost Brazilian state. Roraima’s power system is disconnected from Brazil’s National Interconnected System (SIN), and the R2W model developed by Eneva has become the solution for the state’s energy security and sovereignty, considering former dependency from obsolete Venezuelan transmission infrastructure. This expansion not only reduces costs but also leads to a significant reduction in greenhouse gas (GHG) emissionsright in the heart of the Rainforest, with approximately 30% less CO2 compared to previous fuel sources.

Capitalizing on the substantial gas production capacity in Amazonas, Eneva has committed to investing USD 1.2 billion in two TPPs in the state, marking the company’s most complex endeavor and one of the largest private investments in the region in the coming years. The new Azulão 950 complex, utilizing onshore gas reserves in proximity, will have the capability to generate nearly 1 GW of energy, providing energy security to the region starting in 2026. One of its key objectives is to foster sustainable development in the Amazon’s interior while generating value for all stakeholders involved.

The energy transition extends beyond utilizing natural gas resources in TPPs. In Maranhão, Eneva is actively contributing to a low-carbon economy by supplying liquefied natural gas (LNG) to two major industrial energy consumers. These consumers are transitioning away from fuel oil used in their production processes, such as pulp and paper, and iron ore. In this business model, Eneva plans to invest approximately USD 200 million to liquefy natural gas from the Maranhão countryside and transport it using cryogenic tanks via trucks over around 400 km to reach the consumers. This transition is expected to reduce CO2 emissions by approximately 20%, lower energy costs, and create employment opportunities within the state. The implementation of small-scale LNG solutions represents a promising frontier in replacing fuel oils within the Northern Region of Brazil’s energy matrix, aligning with commitments to reducing CO2 emissions and poverty.

Considering the global challenge of simultaneously meeting the energy trilemma criteria through solely renewable electricity matrices, natural gas will continue to play a fundamental role in numerous economies. In the case of Brazil, the success of onshore gas production demonstrates its potential and opens doors for further opportunities in the future. Eneva stands prepared to embrace new growth prospects and continue making significant contributions to the energy landscape.