Energy Security in Peru: Camisea and Beyond

Energy Security in Peru: Camisea and Beyond

LIMA – Government officials, NGO representatives, and energy executives from Peru, Chile, Argentina, the United States and Colombia joined the Institute of the Americas and Peru’s Ministry of Energy and Mines in Lima on August 26 for a half-day roundtable.

The program was a celebration of the tenth anniversary of the Camisea natural gas project but also a frank assessment of what must be done to consolidate the lessons and upside of the historic energy project in Peru.

The last ten years have been transformative for Peru’s energy sector. The Camisea natural gas project, inaugurated in 2004, now provides all the natural gas consumed in Lima and accounts for 50 percent of the nation’s power generation.

In many ways, Camisea has exceeded expectations. Natural gas production has kept pace with strong economic growth, while best practices developed for environmental protection and community relations have become a model for the region. And the project’s impact on Peru’s economic development is undeniable.

For the Ollanta Humala administration, Camisea has become the cornerstone of efforts to ensure energy access for all Peruvians – so-called ‘massification’ – and plays an important role in the government’s strategy to achieve economic growth with social inclusion.

But as Peru celebrates Camisea’s tenth anniversary, it has become clear that the project alone will be insufficient to meet the country’s rising energy needs.

Instead the project must be recognized as just one contributor to the much larger goal to foster energy security in Peru. In practice this requires investment along the energy value chain. Not just a rejuvenation of the country’s oil and gas exploration efforts but investment in infrastructure and championing the role of renewables in the power sector.

The question for the Humala government and Peru’s energy actors is how to sustain the economic benefits generated by Camisea. More importantly, government, industry and civil society must develop an approach that incorporates the valuable lessons learned in the last decade into energy projects across the country without undermining the competitiveness of Peru’s energy sector.

The Camisea project was launched at a time when Peru was emerging from a period of economic and political instability, providing a much needed injection of foreign capital and laying the foundation for public-private partnerships in the nation’s hydrocarbons sector.

The contribution to both the national energy sector and the broader economy has been significant. Hydrocarbons production in Peru grew an estimated 260 percent in the last decade, due in large part to the exploration and production at Camisea. Since 2004, the project has brought in over $13 billion in investment and boosted the nation’s GDP by approximately $16 billion. Natural gas liquids in particular have made an important contribution to the hydrocarbons trade balance; according to the Peruvian Hydrocarbons Society, Camisea has reduced the trade deficit by $9 billion.

The opportunities for natural gas extend beyond the power sector, with the potential to transform industry and transportation in Peru. The Ministry of Energy and Mines is exploring options for natural gas to replace diesel in fleets of trucks, for example. The government also advocates for the greater use of liquefied petroleum gas or LPG and associated natural gas.

Peru is hopeful that ongoing exploration and production in the Camisea fields will lead to new discoveries and increased reserves. For the Inter-American Development Bank, the lead financier of the Camisea project, the next step is the expansion and development of natural gas markets – both domestic and international – in order to sustain momentum and ensure adequate demand.

Natural gas also has the potential to support greater renewable deployment in Peru. Despite concerns that competition between cheap natural gas and hydropower in Peru’s electric market could cause a decline in hydropower’s contribution, panelists emphasized the importance of both energy sources in a diversified energy matrix. Over time, they argued, natural gas will play a supporting role as the electric sector makes the transition to greater renewable sources.

Synthetic Biology Dispels Fairytales

Synthetic Biology Dispels Fairytales

The Institute of the Americas concluded its 5th Summer Camp on Science and Innovation at the University of California, San Diego (UCSD) in July 2014. The 2014 group of 40 students was the largest since the beginning of the camp.  High school students attended from twelve countries: Bolivia, Brazil, Chile, Costa Rica, Cuba, Honduras, Mexico, Panama, Paraguay, Peru, Venezuela and the U.S. The students, all in high school and Spanish-speakers, came from a variety of backgrounds but had a common goal – to pursue academic studies in science, technology, engineering and math.

The success of the camp was based on a well-balanced combination of lectures, hands-on team projects, lab time, field visits, guest speakers and the dormitory experience at UCSD’s Eleanor Roosevelt College.

Pivotal to this year’s success was our new collaboration with Dr. Justin Pahara (Synbiota Inc.) and Dr. Wendy Ochoa (MoBio). Dr. Pahara flew from Canada to lead a three-day crash course on hands-on genetic engineering.

Dr. Pahara’s and Dr. Ochoa’s execution of the class was phenomenal. Everything was strategically planned out and, with Dr. Ochoa’s help, the workshop was run entirely in Spanish.

“It was exciting to see a synthetic biology workshop such as this being run in Spanish! It was the first time I’ve done intense science like this with realtime translation – very cool and extra engaging,” says Dr. Pahara.

The first day of the three-part session started with an introduction to synthetic biology, which was then followed up by an extensive discussion of the ethics of bioengineering.

Is genetic engineering good or bad? What are the possibilities of genetic engineering and what can you actually do with it?  The students were immediately engaged with Dr. Pahara’s enthusiasm and passion for teaching. There were a lot of questions, the students were, however, very anxious to get to the exciting part – actually doing science.

Dr. Pahara explained that they were going to engineer E. coli bacteria to be colourful (red, blue, yellow for single colours, as well as combinations of colours such as or-ange, green, and purple), and they also discussed how colour is formed in the living organism. The students were alternatively ecstatic and impatient because they could not wait to actually start the activity.

Before any DNA assembly could take place the students had to design the DNA they wanted to build using an open source tool called GENtle.  Students loaded the DNA parts that are included in the Rainbow Factory Kit into GENtle and created their DNA circuit using a simple pick-and-place user interface. There, they were able to see the actual DNA code that their plasmid would be composed of. After much consideration and discussion, the students assembled their DNA design using real DNA from the kit. DNA was assembled one block at a time on magnetic beads using a simple hands-on method until they had as-sembled their full DNA design. Next, they separated their DNA from the beads and had pure DNA.

Finally, they put their DNA into E. coli bacteria using a process called transformation. After mixing their DNA with bacterial cells, the group completed a “heatshock” which caused the DNA to enter the cells. Then, they incubated the cells and put them onto agar plates (like jello) and incubated the plates overnight. The next day we saw the colourful bacteria growing on the plates. Success!
Dr. Pahara’s activity was the highlight of the camp. The students were doing real-life science with trial and error, and in a matter of just three days they were able to see their living results – something that none of them had done before.

The students were beaming with happiness when they saw their results. The impact it had on the students became even more apparent when Dr. Pahara’s activity won 1st place in the students’ evaluation bumping, for the first year ever, an activity at a very well-known theme park in California to 2nd place.

Denisse A. Fernandez is the Director of the Summer Science Program for the Institute  of the Americas a non-profit organization on the University of California San Diego, campus in La Jolla, CA.

Institute of the Americas Signs Agreement with Beijing Law Firm to Promote China-Latin America Business Expansion

BEIJING – The Institute of the Americas and DeHeng Law Offices of Beijing have signed a collaborative agreement to assist Chinese businesses in launching and expanding business operations in Latin America.

DeHeng Law Offices is one of the largest law firms in China, with 1,500 attorneys on staff.  The firm, which has 23 offices in mainland China, as well as offices in New York, Seattle, Orlando, Brussels, Paris, Munich, Frankfurt, The Hague, Dubai, Sao Paulo, Australia, New Delhi, Seoul and Japan, is also focusing on assisting clients seeking to do business in Latin America.

The agreement between the Institute of the Americas and DeHeng Law Offices was signed in Beijing on July 17, when the two organizations held a seminar in collaboration with the China Overseas Development Association titled, “Investments in Latin America: Focusing on Mexico’s Energy Reform.”

Hu Weiping, secretary general of the China Industrial Overseas Development and Planning Association, spoke during a July 17 seminar in Beijing about efforts to encourage outbound investment to Latin America.The conference was attended by more than 100 business executives, including representatives of the China National Petroleum Corp. (CNPC), China National Offshore Oil Corp. (CNOOC), the China Petroleum Engineering & Construction Corp., Sany Heavy Energy Machinery Co., China Harbour Engineering Co., COSCO International Holdings Limited, SinoSure and the Bank of China.

The July 17 seminar took place on the day that Mexico’s Senate voted to approve secondary legislation to implement energy reforms.  The seminar also coincided with President Xi Jinping’s trip to Brazil, where he attended a BRICS summit and signed a host of economic agreements between China and Brazil.

Mexican Ambassador to China Julian Ventura gave a keynote speech in which he outlined key provisions in Mexico’s energy reforms, saying there are new possibilities for an “action-oriented agenda between China and Mexico.”

Ambassador Ventura told the audience that Mexico’s “oil production declined by 25 percent over the last decade. This situation is not sustainable in the long term and is hampering our progress,” he said.  “A common challenge that all countries face is taking the necessary steps to ensure the well-being of our citizens.  Energy has to be a driver and not an obstacle in any economy.”

Wu Guoping, a Latin America expert at the Institute of Latin American Studies (ILAS) of the Chinese Academy of Social Sciences, called Mexico’s energy reform “revolutionary because of the impact it will have on Mexico’s economy and its society.”

He said Mexico’s energy reform will have a huge impact on the country’s economy, creating 2.5 million jobs by 2025.

Mexican Ambassador to China Julian Ventura (left) speaks with Hu Weiping (right), secretary general of the China Industrial Overseas Development and Planning Association at a July 17 seminar in Beijing on Mexico’s energy reforms as Harrison Jia (second from left) of DeHeng Law Offices and Luis Vera (third from left) of Vera & Asociados look on.“Energy reform is revolutionary but it also faces challenges,” Wu said, “because nationalism is very strong in Mexico. The reform faces potential challenges from labor unions that have benefitted from long-standing protections in the energy sector.”

Mexican attorney Luis Vera told the audience that Mexico is looking beyond traditional energy sources to shale oil and gas and is planning major exploration projects in northern states such as Chihuahua. “Private investors, including Chinese firms, are buying land,” said Vera, who is the founding partner of Mexico City-based Vera & Asociados.  “That is where the big investment is going to be.”

Vera also emphasized the huge potential in renewable energy in Mexico over the next two decades.  “By 2030, Mexico must get 35 percent of all its energy from renewables,” he said.  “In wind energy, all of the technology comes from China. We have created the market and we are expecting you to be there,” he said.

Francisco Martinez Boluda, a partner in the Beijing office of the Uria Menendez law firm, said, “We are witnessing a change in the relationship between China and Mexico which can be complementary. We think that in 2015, things are going to start to move.”

Harrison Jia, a partner in DeHeng Law Offices, outlined labor laws and work rules in several Latin American countries that set standards for wages, hosing and medical coverage. He told the audience, “Mexico is more flexible than Brazil” in its labor requirements for foreign companies.

Jia attended a two-week Chinese Executive Program at the Institute of the Americas in May 2014 which included a week-long trip to Mexico City where he and other participants in the program met with top Mexican government officials and business executives.

“We want to introduce Mexico so more Chinese companies can go there,” he said.

Chile Energy Sector Needs a “Rainmaker”

Chile Energy Sector Needs a “Rainmaker”

SANTIAGO – Over one hundred representatives from Chile and across the hemisphere gathered in Santiago to assess ways to advance the government’s energy road map at the Institute of the Americas’ Chile Energy Roundtable on June 24.

Energy Minister Maximo Pacheco, during his keynote address, underscored the difficulty in finding an element that had a greater impact on Chile’s productivity than energy, and particularly energy costs.

With a persistent drought and high electric prices as a backdrop, Chilean President Michelle Bachelet announced her administration’s energy agenda in mid-May, in advance of the 100 day deadline. While geographically distant, the US energy revolution and potential access to a new source of – hopefully cheaper – natural gas exists in close proximity to Chile’s energy policy dialogue.

The energy agenda set off intense debate over the role of the state in Chile’s energy market, how to reduce prices and finding the right approach and model to collectively overcome the challenges facing development of critical energy projects. Lost on no one was a strong emphasis on increasing Chile’s commitment to the global natural gas market through liquefied natural gas (LNG) imports, but also domestic exploration and production in the country’s south.

Indeed, there is no lack of optimism across many facets of the Chilean government and industry for tapping into the US energy boom and LNG exports. Noting the benefit of its free trade agreement with the United States, Chilean officials including the minister spoke highly of the option for not just increased expansion of Chile’s LNG import capacity but also from US Gulf of Mexico export projects soon to come online.

Recently appointed ENAP CEO, Marcelo Tokman, also underscored the role for natural gas as part of the energy agenda and the possibility for expanded import infrastructure but also a role for ENAP to leverage natural gas for power generation. More distant, but part of the mix he suggested, are efforts to boost exploration of unconventional natural gas resources in southern Chile.

Near consensus was evident among roundtable participants on the need for Chile to continue its efforts to develop a diversified and sustainable energy system.

Perhaps most importantly, there was almost no dissent as to the need for a paradigm shift in how the energy sector – government and industry together – develops projects and engages communities, not just in Santiago but across the diverse regions of the country. A more proactive government role and clearer rules and regulations vis-à-vis zoning figure prominently in the energy agenda and were reiterated by industry participants as critical. But, differences of opinion arose as to the best approach for increasing diversity of Chile’s energy matrix while also striving to reduce prices.

The importance of water for Chile’s energy outlook coursed through much of the discussion. Panelists called hydroelectricity a key piece of any sustainable energy system, and noted that water was Chile’s “fuel.”

One panelist remarked that what Chile really needed was a “rainmaker.” The reference to a need for a break in the drought hammering the country was obvious but also implicit in the comment is the need for an increase in energy investment in the country.

Renewable energy, or more specifically what in Chile is referred to as nonconventional renewable energy resources, or NCREs, has increasingly vocal and strong support in the country. As part of the energy agenda, the Bachelet administration highlighted its commitment to the previously established goal of 20% of electric generation from NCREs by 2020.

The importance of interconnecting Chile’s anachronistically unconnected northern and central electric systems (SIC and SING) was agreed to by most, but when pressed as to the timeline there was little optimism for completion of the effort during the current Bachelet administration. Some pointed to early 2020s as a realistic timeline.

Not to be discounted, some argued, are the increased regional interconnection efforts being embraced in Chile, most notably the Alliance of the Pacific framework but also regional energy markets and the opportunity to develop regional electric interconnection stretching from Colombia through Ecuador and Peru to Chile.

Mexico, Shale, and the U.S. Energy Boom Take Center Stage at La Jolla

Mexico, Shale, and the U.S. Energy Boom Take Center Stage at La Jolla

LA JOLLA – Energy reform in Mexico, the energy boom in the United States, the role of natural gas, and Latin America’s unconventional resource potential dominated the discussions over the two days of the XXIII annual La Jolla Conference on May 21-22.

Almost two hundred participants from across the Western Hemisphere participated in this year’s conference that featured addresses by senior officials from Pemex, the Panama Canal Authority, Mexico’s national hydrocarbons agency CNH, Argentina’s YPF, Mexico’s ministry of energy and Perupetro, as well as discussion panels with thought leaders from across industry, academia and the energy consulting world.

The optimism and hope for a new energy future in Mexico were evident throughout the course of the discussions, as was the interest in the continued march of the U.S.’s oil and natural gas production boom. Less clear was if and how Latin America would be able to replicate the U.S.’s model for its energy renaissance.

The sheer magnitude of the U.S. energy revolution began the conference discussions and set the stage for much of the following discourse. Panelists’ proffered figures that underscored today’s energy panorama: total growth in production has been equivalent to growth in all OPEC countries combined. Pennsylvania’s natural gas production alone was 1.5 times the size of Qatar’s, and may soon surpass that of Russia.

Latin America’s unconventional resource potential was not disputed, but among many optimistic outlooks several panelists cautioned that the regulatory environment, development costs, access to capital, local infrastructure and overall efficiency of shale projects must be improved. Indeed, the caveats all seemed to focus on the elements above ground facing the region’s incipient shale wave.

Though it might take longer than expected – many anticipate the revolution to take about a decade to spread across Latin America – there was near consensus that the resources would be developed and serve as important domestic sources of energy as well as boost economies from Mexico to Colombia to Argentina.

An important tangential discussion to the shale and U.S. energy boom was the revitalized interest and potential for natural gas and particularly the role for liquefied natural gas (LNG) in the hemisphere. Indeed, many panelists argued that the U.S. could become the largest LNG supplier in the world, with the US Gulf of Mexico an ideal place for a new hub. Some also foresaw an eventual convergence of global LNG prices as soon as 2018.

Institute of the Americas energy policy associate Alexis Arthur moderates a discussion of natural gas and LNG issues in the hemisphere with panelists Manuel Benitez of the Panama Canal Authority, Ricardo Iglesias of GDF Suez, and Jed Bailey of Energy Narrative

The Panama Canal’s long awaited expansion will play a vital role in making LNG exports competitive, and the Canal may be instrumental in making the region a new LNG hub.

The expanded waterway will reduce LNG transit time from Trinidad & Tobago to Chile by over 6 days and cut over 8 days off the time required to move LNG from Peru’s Camisea project to Spain.

Across Latin America demand for natural gas and LNG has boomed; growth in demand has outpaced GDP growth. Latin America’s appetite for gas will continue to grow because of economic expansion, increased power generation, and fuel switching.

But it was perhaps Mexico’s monumental energy reforms that truly animated many of the discussions. Updates on the reform process, with secondary legislation set for debate soon after the conference, were shared by representatives from all facets of the government and industry.

Presentations of Pemex’s evolution and the role of the revamped national hydrocarbons agency engendered a series of debates. When asked how the revamped national oil company would partner and develop projects, the head of the firm’s E&P company outlined the transition to a productive state enterprise and argued that partnerships could be announced by the end of the year.

Representatives from a wide range of international companies were eager to hear from and meet with Pemex officials on the sideline of the conference.

Similarly, the state power company CFE set forth plans to further evolve into a natural gas player, highlighting several midstream projects being developed that would also include new collaboration and partnering opportunities for private firms from across Mexico and the world.

Chinese Executives Attend IOA’s Two-Week Program on Doing Business in Latin America

Chinese Executives Attend IOA’s Two-Week Program on Doing Business in Latin America

LA JOLLA and MEXICO CITY – The Institute of the Americas held its first annual Chinese Professional Executive Workshop titled “East Meets West – An Introduction to Latin America” from May 5-16, 2014.

This two-week workshop was co-organized by the Institute of the Americas and the Institute of Latin American Studies at Chinese Academy of Social Sciences (ILAS -CASS), and sponsored by Development Bank of Latin America (CAF), Vera & Associates, HSBC and Chadbourne & Parke. ChinaGoAbroad from Beijing was the collaborator of the Institute of the Americas on this workshop.

The 2014 program focused on Mexico’s energy reform and secondary regulations, with speakers including Luis Vera, founding partner of Mexico City-based Vera & Associates; Rachel Bierzwinsky, counsel with Chadbourne & Park in New York; and Antonio Borja, attorney with Galicia Abogados in Mexico City, and Institute Energy Program Director Jeremy Martin, as well as economic experts from HSBC Mexico and Deloitte.

During the first week of the program at the Institute’s campus in La Jolla, Chinese executives heard presentations on key Latin American countries including Mexico, Cuba, Chile and Brazil.

Associate Vice Chancellor for Public Programs and Dean of Extension at the University of California San Diego (UCSD) Mary Walshok was the keynote speaker on the opening day of the program.

Ambassador Bruno Bath, Consul General of Brazil in Los Angeles, spoke about business opportunities in Brazil. Francisco Correa, Trade Commissioner in ProChile’s Los Angeles office, spoke about innovative approaches to doing business in Chile. And Richard Feinberg, Professor at UCSD’s Graduate School of International Relations and Pacific Studies, presented his research on Cuba’s emerging entrepreneur and middle class.

Antonio Maldonado, a San Diego-based attorney who specializes in U.S. –Mexico cross-border litigation, spoke about ways of avoiding legal disputes and conflict resolution in U.S.-Mexico-China business transactions.

A highlight of the program was a day-long field visit to Tijuana, Mexico, where the participants met with representatives of Deloitte, led by Tijuana China Services Group Director Gonzalo Gomez, and the Tijuana Economic Development Council to learn about the business opportunities of operating a maquiladora in the border city.

The delegation also visited Qualcomm Institute on the campus of UCSD, enjoyed wine tasting and dinner sponsored by HSBC at Orfila Winery, and took a ferry across San Diego’s bay for dinner in Coronado.

The second week of the workshop took place in Mexico City, where the participants met with representatives from HSBC Mexico, China Council for the Promotion of International Trade (CCPIT), ProMexico, Huawei, National Exterior Commerce Bank (Bancomext) and Galicia Abogados to further understand business practices and opportunities for Chinese investors.

Salvador Wang, a representative of Huawei’s Public Affairs Department, spoke with the Chinese executives about the giant technology company’s experiences in Mexico. The delegation also heard a presentation by Xiaochu Shi, Assistant Representative in CCPIT’s Mexico office.

At HSBC’s corporate offices in Mexico City, Chief Economist Sergio Martin, spoke about projections for Mexico’s economy. And Raluca Popa, head of HSBC’s China Desk, spoke about the internationalization of the RMB.

At Deloitte’s Learning Center on the city’s elegant Reforma Boulevard, Chinese executives heard detailed information about Mexico’s fiscal reforms and tax laws and met with Xiao Cheng of Deloitte’s China Services Group.

Miguel Siliceo Valdespino, Chief Financial Officer at Bancomext, spoke with Chinese executives about new financing agreements between China and Mexico to promote exports to China. And attorneys at Galacia Abogados, led by Counsel Juan Pablo Cervantes, spoke about a recently approved National Infrastructure Plan, the first such plan in Mexico’s history.

During the week in Mexico City, the Chinese executives made a field visit to a Grupo Bimbo plant, where they toured the plant and learned about Bimbo’s successful strategy to introduce its line of bread products to the Chinese market.

They also toured the majestic pyramids of Teotihuacan to deepen their appreciation of Mexico’s cultural heritage.

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