Brazil's LNG procurement strategy shifted over the second half of 2014 as the country moved toward short-term contracts and tranche purchases with a smaller number of suppliers.

Increasingly severe drought conditions in the hydropower-dependent country are gradually making natural gas a baseload source of power. In response, state-owned oil and gas company Petrobras is reducing its exposure to the price and supply uncertainty associated with prompt, spot market buying.

"I think the recent drought has really changed the way Petrobras buys LNG," one US-based market observer said. "The old buying model was based on the notion 'We'll buy LNG when we need it.' ... The new assumption is 'We're going to need LNG, unless it rains.'"

Brazil's earlier procurement strategy gave the country more flexibility to buy from a larger number of suppliers at the cheapest spot-market price. More recently, Petrobras has been buying from a smaller number of suppliers, in months-ahead tranche or short-term contract purchases.

"That's why you're not hearing Petrobras in the spot market much these days," the US-based source said.

An analysis of Brazil's LNG imports during the second half of 2014 shows a more concentrated buying pattern, commensurate with tranche or contract buying. For the July-December period the top three suppliers to the tropical nation sent 68% of total imported LNG. For January-June, the top three suppliers sent just 55% of the total, an analysis of data from Platts unit Bentek Energy shows.

"If you look at their procurement pattern, you can see that they're sourcing vessels from a smaller number of exporters," the US source said. "It's more concentrated. That seems to signal to me that they're buying on short- or medium-term contracts."