Energy in the Southern Cone and Uruguay’s Energy Hub Bid

Energy in the Southern Cone and Uruguay’s Energy Hub Bid

MONTEVIDEO — Even before extreme weather conditions in the Southern Cone burdened national electric grids and energy infrastructure, countries of the region were already struggling to meet their internal energy demand. In some cases, years of poor policy decisions and lack of investment in the sector — particularly in the oil and gas upstream — had left the energy industry in a tenuous position.

Moreover, the pioneering examples of energy integration in the Southern Cone, which had so capably advanced the region’s collective energy and economic outlook, are now more often than not but fading memories.

The stress on the energy sector and by extension national economies has also led to a renewed call for energy diversification and efforts to foster energy security across the region.  And policy makers’ language now includes an important caveat: “diversificación con soberanía (diversification with sovereignty).”

From Montevideo to Brasilia to Buenos Aires, energy policymakers have been forced to reconsider what comprises their national energy strategy, with some more assertive than others in devising the most rational path forward.

Those were the key messages set forth by a distinguished group of government officials, private sector representatives and multilateral development bank representatives at the Institute of the Americas Southern Cone Energy Roundtable held on March 18 in Montevideo.

 

Indeed, in Uruguay the need for clear and stable rules and long-term vision for energy progress, prompted officials to reach political consensus for a strategic energy policy – Política Energética Uruguay 2030 — that sought to reduce their dependency on imported energy, whether oil products, natural gas or electricity. Projects to further deployment of wind energy and incorporate natural gas via a liquefied natural gas (LNG) terminal just off the coast of Montevideo are well underway.

Meanwhile, in Brazil and Argentina policy makers have sought to offset spiking demand by way of imported natural gas and LNG. Argentina has also increased electric imports from Uruguay. Efforts in both countries to advance the role for non-hydro renewables such as wind and solar have received a great deal of attention but are yet to yield the results energy planners expected.

Great anticipation continues to encapsulate the hydrocarbons potential in Argentina and Brazil, with world-class natural gas deposits and immense offshore oil reserves.

Marco Fidelis, ANP; Alvaro Ríos, Gas Energy; Marta Jara, Gas Sayago; Jeremy Martin, Institute of the Americas; Gonzalo Casaravilla, UTE; Carlos Gothe, GNLS (GDF Suez Group)

Development of the reserves remains challenging, time consuming and extremely expensive. Indeed, in terms of exploiting Argentina’s unconventional natural gas resources in the Vaca Muerta formation, the cost of a shale gas well is roughly five times that of a similar well in the United States. Exploiting Argentina’s shale gas reserves requires greater efficiencies and improved infrastructure to truly harness the resource to the benefit of the nation’s energy outlook.

It is conceivable that with the steps already taken, Uruguay will develop into a small scale energy hub in the Southern Cone in the medium term, panelists agreed. This is particularly important as Brazil and Argentina continue to import natural gas from Bolivia, which itself struggles with the possibility of a natural gas deficit by the end of the decade.

Many argued that nations of the Southern Cone would do well to return to their long-ago innovative ways when it comes to energy integration, exchanging both natural gas and electricity. That remains clear regardless of the exact outlines of Uruguay’s role as a regional energy hub.

Take but one example, the AES Uruguaina project: with minor investment and the renewed supply of natural gas made possible by the Gas Sayago terminal in Uruguay, the long-dormant power plant could be restarted and able to offset some of the increasing energy demand in southern Brazil.

However, the Uruguaina project underscores the importance of reinvigorating regional integration. Despite the minimal new investment required, restarting the power station is not feasible without a tripartite agreement amongst Argentina, Brazil and Uruguay for use of pipeline infrastructure to land the gas at the plant.

Countries in the Southern Cone are at a critical juncture in terms of ensuring long-term energy security. Opportunities abound and policy makers would be unwise to allow the moment to pass.

Natural Gas in the Caribbean: Matching Opportunity and Reality

For over 10 years, the Dominican Republic has counted natural gas as an important fuel source for its energy matrix. Since the opening of the AES Andres terminal in 2003, importation of liquefied natural gas (LNG) has catapulted gas‐fired power generation to almost one‐third of installed capacity. Yet, despite those developments, 40% of the nation’s electricity is still generated from fuel oil. Dependence on oil is a familiar story throughout the Caribbean. According to a study by AES, fuel oil comprises 85% of power generation in the region.

Natural Gas in the Caribbean: Matching Opportunity and Reality

NAFTA and the China Factor is Focus of IOA/USC Conference

NAFTA and the China Factor is Focus of IOA/USC Conference

LOS ANGELES – The University of Southern California (USC) and the Institute of the Americas held conference titled “NAFTA at Twenty: Trade, Transformation and the China Factor” on USC campus on March 5, 2014. The event attracted nearly 100 business executives and academic scholars, as well experts from multi-national organizations such as the United Nations.

China’s role in the North American Free Trade Agreement (NAFTA) was the focus of the first panel. Dr. Enrique Dussel, director of the Institute for China-Mexico Studies at the National Autonomous University of Mexico (UNAM), divided NAFTA’s 20 years into two parts: between 1994 and 2000 there was increasing integration in terms of trade within North America; yet after 2000, China began to compete with both Mexico and US in the regional market, which could be seen as an “interruption” of the integration process of NAFTA.

Dr. Ralph Watkins from Americas Trade Analysis stated that Mexico’s maquiladora sector lost 288,000 jobs due to the China factor, yet China is not mainly to blame for the job loss in US because the imports from China were not high-value-added goods. Dr. Watkins raised the question of ways in which Mexico could compete with China. He suggested that Mexico lower transport costs and shorten the time from manufacture to market. According to Dr. Watkins, Mexico is competitive with China in products that require just-in-time deliveries, frequent changes in design and protections in intellectual property rights.

 

Amy Liang from Deloitte in Mexico City shared her experience in helping a Taiwanese company set up a maquiladora in Tijuana, Mexico in 1999. She recalled the language and cultural barriers of bringing technicians from Taiwan. She said translators and local managers were hired at the maquiladora for better communication and management. She stated that nowadays Chinese companies are focusing on ethical business practices in their global expansion, including in Latin American countries.

The second panel featured American Quarterly’s winter issue on “NAFTA @ 20”. Christopher Sabatini, Editor of American Quarterly, and Ambassador Arturo Sarukhan, former ambassador of Mexico to the United States, promoted the idea of “North American goods” instead of products from the three individual countries. According to Ambassador Sarukhan, the challenge is to re-engage the private sectors from the three countries. He expressed optimism that the Mexican energy reform will open new doors for this process. He promoted the Trans-Pacific Partnership (TPP), saying that it will be the way to bring up the idea of “North American goods” without mentioning NAFTA once again in the political debates.

Jeremy Martin, Energy Program Director of Institute of the Americas, also spoke at this panel and stated that while Mexico’s energy reform will be the big game changer for North America, Mexico still needs to embrace the opportunity in an international context. Martin commented that US-Canada is the world’s largest energy integration, and when coupled with Mexico’s energy reform, a self-sufficient North American energy market will be a driving force with strong competitiveness that will bring geo-political changes to the region.

Three representatives from Tijuana, Mexico, talked about innovation, relocation and human capital. Israel Lopez, from Universidad Technologica de Tijuana, said foreign firms are coming to the city to recruit future engineers for their companies. Flavio Olivieri, of the Tijuana Economic Development Corporation, gave a presentation on innovation and said Asia’s shift towards innovation creates added competition with Mexico. Rafael Solorzano, former Director of Secretariat of Economic Development, named the city of Wuhan as the Chinese Sister City of Tijuana and said that the Chinese investors are increasingly interested in the infrastructure financing opportunities in Mexico.

Dr. Juan Carlos Moreno-Brid director of the Mexico office of the U.N. Economic Commission in Latin America and the Caribbean (ECLAC) gave closing remarks for the half-day conference. He commented on the North American regional integration, and brought up topics of fiscal and banking reform and industrial policy adjustment for both Mexico and NAFTA.

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