# Governance and Dynamic Efficiency with Network Structure in the Brazilian Natural Gas Utilities
###### Abstract  
The objective of this work is to analyze the relevance of governance (corporate and ownership concentration) for the divisional inter-temporal dynamic efficiency in piped natural gas utilities in Brazil. The main innovative contribution of this work is the application of inter-temporal (dynamic) efficiency analysis with network structure in the first stage, in this case, the 'Dynamic DEA (Data Envelopment Analysis) with network structure: A slacks-based-DNSBM (Dynamic Network Slacks-Based Measure)', in which two divisional interactions \(\theta^{*}_{\text{sk}}\) (technical-operational and economic-financial division) between \(\tau^{*}_{\text{sk}}\) periods and divisional \(\rho^{*}_{\text{sk}}\) periods are reflected in the overall efficiency scores \(\theta^{*}_{\text{s}}\), representing an approach not yet explored by the previous literature on the sector and subject investigated. The database used corresponds to 21 Brazilian natural gas utilities in the form of a balanced data panel, which were collected for the period 2014-2019. The second stage (explanatory) was estimated through the panel with random effects to identify the relationship between governance and efficiency, considering certain context factors. The results show that the average general efficiency was 74.96%, resulting from the interactions between the average efficiency rates of 72.21% of the technical-operational division and 82.03% of the economic-financial division, and suggest that the corporate governance index and ownership (public or private) are not relevant factors for the efficiency results studied. piped natural gas; corporate governance; efficiency; DNSBM +
Footnote †: journal: Applied sciences  
002420  
In Brazil, the increase in natural gas consumption has been driven, according to the Brazilian Association of Piped Gas Distribution Companies [3], by the start of pre-salt production and the expansion of the piped gas distribution network, which has brought this energy source to more consumers. As a result, Brazil was responsible for a production of 40.86 billion m\({}^{3}\) in 2019, moving up one position compared to the previous year among the largest proven reserves in the world, and currently occupying the 31 st position in the global ranking [4]. This position is still a reflection of the discoveries in the pre-salt province in the mid-2000s, thereby placing the Brazilian oil and gas sector in the international spotlight. Due to this focus on strategically positioning itself better in the global market and achieving structural development in the national market, the country decided to reconfigure its oil and gas activities with the enactment of Law No. 9,478/1997, known as the Petroleum Law. Currently, Resolution No. 16 is in force, establishing the new gas market with the primary objective of expanding companies in the sector and carrying out a complete reform, eliminating the figure of the integrated public monopoly, also known as the natural monopoly [5]. A natural monopoly is considered the best or only option to serve a particular market, aiming to protect consumers against the potential of exploitative monopoly practices [6]. However, in the specific case of natural gas, a natural monopoly occurs in the distribution of piped gas, as the installation of a distribution network is a complex process requiring substantial infrastructure investment. Moreover, distribution companies must meet a series of technical and regulatory requirements to ensure the safety and quality of the services provided. For this reason, many countries adopt a regulatory model that allows for a single supplier of piped gas in each concession area. In Brazil, the distribution of natural gas is regulated by the ANP, or Agencia Nacional de Petroleo, Gas Natural e Biocombustivels (National Agency of Petroleum, Natural Gas and Biofuels), which sets the rules for the concession of distribution services in each region.