Panama City – Almost 200 energy executives, government officials and policy makers from across Central America and the hemisphere convened in Panama City on September 27 for the Institute of the Americas’ conference “Prospects for LNG and Natural Gas in Central America.”
A convergence of global and regional issues has led Central America to seek to further understand and consider the role for natural gas in its energy matrix.
Panama’s Secretary of Energy, Vicente Prescott, AES’s Gardner Walkup, the World Bank’s Ariel Yepez, former Costa Rican energy minister Roberto Dobles, among others, underscored three fundamental elements driving the discussion: 1) an increasing abundance of natural gas in the Western Hemisphere; 2) low natural gas prices and similar long-term price trends; and, 3) Central America’s need for additional electric power generation fuel options and thus an anchor role for natural gas-fired electric plants.
Speakers throughout the day pointed to global energy trends and specifically the ascendancy of natural gas production in the Western Hemisphere.
A convergence of global and regional issues has led Central America to seek to further understand and consider the role for natural gas in its energy matrix. The importance of the unconventional resource revolution – the so-called shale gale – and boom in entrepreneurial investment and technology gains in unconventional resources across the world, but particularly in North America was frequently cited.
Natural gas’ increasing abundance led several speakers to emphasize a critical corollary point: record low prices in the United States.
For many, that natural gas prices have remained low for several years is important. But, especially relevant for Central America has been the price divergence from global markets and particularly oil prices. Indeed, Henry Hub natural gas prices have been below $6/mmbtu since January 2009 and various forecasts presented at the conference indicate a band between $4 and $8 /mmbtu for the next 20 years.
The “shale gale” and “golden era for natural gas” arrive at a critical moment for Central America’s electric sector and economies. Over the last 20 years, the region has seen a huge spike in petroleum-based electric power generation, as well as increased transportation fuel consumption.
Changes in the region’s power generation sources occurred at the same time as a surge in global petroleum prices. The region’s petroleum dependency has had a significant impact on the region’s imports bill, costing on average nearly $9.5 billion per year over the last 3 years, or approximately 6% of the region’s GDP.
Speakers asserted that, given the lack of significant natural gas reserves across the countries of the Isthmus, imports of liquefied natural gas (LNG) appears to be the most logical option to most effectively land natural gas for the region.
Raul Carral of Wärtsilä, Eduardo Lima of Pacific Rubiales, and Manuel Colcombet of GDF Suez discussed huge leaps in LNG technology that offer practical, scaled project options to pursue the demand opportunities for natural gas in Central America.
The environmental upside for Central America to transition to natural gas also figured throughout the day’s discussions. Oft-repeated was the notion of a “greener” footprint derived from natural gas-based power generation and the benefit of switching from diesel and heavy fuel oil generation to combined cycle gas fired power plants that emit much less carbon dioxide.
Consensus emerged on the need for Central America to seize the opportunity presented by natural gas, but in a procedural manner that involves all stakeholders and clearly defines regulatory and investment guidelines. Indeed, the importance of building blocks that place electric power generation at the core of the process to develop natural gas imports followed by a tiered approach that ultimately incentivizes other natural gas uses such as transportation fuels and industrial inputs emerged as paramount.
Successful examples of similar developments in Chile, Argentina, Brazil and particularly the Dominican Republic, where in ten years natural gas has gone from zero to 14% of that country’s energy matrix, were important reference points for participants and created a desire and goals for Central America to emulate.