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.
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.