SAN JOSE, COSTA RICA — Natural gas’s time is near in Central America, and the cleaner burning fuel will be a driver of energy sector diversification with important economic and environmental upsides echoed a succession of speakers at the Institute of the Americas’ 2nd Annual Forum on the Prospects for LNG and Natural Gas in Central America.
But also clear is that the region must pursue appropriate solutions given its market size. Or as one speaker summed it up: “small markets require small solutions.”
The good news is that several solutions exist. From examples in Norway, Southeast Asia and closer to home in the Dominican Republic, a variety of small scale and hub-and-spoke concepts offer the capacity for landing natural gas in the region.
Indeed, with a strong anchor in the region’s booming power market and the benefits of breaking the financially and environmentally debilitating dependency on imported petroleum products, natural gas has Central America poised to diversify its dual energy matrix of hydropower and petroleum derived products.
Take Costa Rica, long one of the region’s if not the world’s most important proponents of renewable energy and “green development;” the country has a formal policy goal of carbon neutrality by 2021.
Due to the complexity of developing sufficient renewable resources, particularly large scale hydropower, state power company ICE has focused on natural gas as its “Plan B” for meeting the nation’s roughly 4% annual power demand growth and emission reduction targets of 6 million tons of CO2.
Costa Rica’s minister of energy and the president of ICE concurred that it is difficult to see the country meeting its carbon reduction targets and long-term power supply without natural gas.
Panama and El Salvador also underscore the urgency and desire of the region’s energy policy makers to seize the natural gas opportunity for their countries.
In Panama, policymakers have focused the first stage of natural gas use in the country’s power sector. Panama has advanced with plans to develop the nation’s first natural gas import project through a liquefied natural gas terminal located at Telfers Island. The project, auctioned in early 2013 and awarded to Empresa Panama NG Power, SA, counts a 400MW power plant set to initiate in 2017.
In El Salvador, a just-concluded power supply auction of 350MW organized by the government together with electric distribution companies actively pursued natural gas-fired power as part of the auction process and directly excluded bidders from submitting fuel oil or diesel projects.
Central America does not yet count any natural gas production. A lack of domestic resources means that the region will have to turn to the global marketplace in order to satisfy its desire to avail itself of natural gas’s upsides. The need to import natural gas most likely means LNG and supplies one day from Trinidad & Tobago, the next Peru, and the day after Colombia, North America or any of the 18 LNG exporting countries across the globe.
Not dissimilar from the potential of diversifying its energy matrix, many analyses favor the diversity of supply that LNG offers, with examples of Chile and Spain important to consider as Central America moves forward with the imminent inclusion of natural gas in its energy matrix.