Energy continues to be a bright spot in the US-Latin America relationship and new developments, like an uptick in US LNG exports, offer opportunities to increase energy security and cooperation across the Western Hemisphere, said panelists at an event co-hosted by the Inter-American Dialogue and Institute of the Americas on December 15th.
Energy plays a central role in bilateral and trilateral cooperation with Mexico and Canada. The United States is working to expand this cooperation through increased data sharing for cross-border transmission, generation, and renewable energy mapping, as well as through technology sharing for carbon capture and storage, noted Department of Energy Deputy Assistant Secretary Beth Urbanas.
The three countries work on energy issues both trilaterally and through larger multilateral efforts like APEC and the G20. Mexico also recently joined the International Energy Agency and the North American Electric Reliability Corporation (NERC), providing two additional avenues for cooperation. Mexico joining NERC benefits both Mexico and the United States, noted Mark Nelson, regional vice president and director of issues management at Sempra, as Mexico can help provide system reliability and voltage support to the United States in times of energy distress.
Investment by US companies in Mexico following its energy reformhas also strengthened bilateral energy ties. Oil majors are entering the downstream space in Mexico, even though they are largely divesting from those assets in other countries, said Carlos Sole, partner and Latin America practice co-chair at Baker Botts.
A recent uptick in US natural gas exports represents another significant opportunity for US-Latin America energy trade and investment, said John McCarrick, deputy assistant secretary at the Department of State’s Bureau of Energy Resources. LNG exports – which began in earnest just last year – reached 465 billion cubic feet in the first 9 months of 2017, already 2.5 times greater than total 2016 LNG export volumes. LNG exports are projected to reach 4.4 trillion cubic feet by 2035.
At the same time, Latin America is increasing its capacity to receive LNG. Regasification capacity in the Americas, excluding the United States and Canada, will reach 50 million tons in the next few years, said Leslie Palti-Guzman, director of global gas at Rapidan Energy Group. Central America and the Caribbean alone will account for 8 million tons of this regasification capacity, and will be a significant growth opportunity for US LNG exporters.
These terminals may see low utilization rates, however, as LNG is used more as a backup fuel in Latin America. But the flexible contract terms offered by US LNG exporters and the United States’ geographic proximity make the fuel particularly attractive as a backup to baseload power and intermittent renewable energy. In Brazil, for example, US LNG is imported when hydropower supply is lower during the dry season, said Edmar Luiz de Almeida, professor at the Federal University of Rio de Janeiro’s Institute of Economy. In Central America and the Caribbean, US LNG can also help fill the vacuum left by Venezuela’s Petrocaribe shipments, which have fallen sharply in recent years, and a decline in shipments from Trinidad.
Going forward, the US government may try to create a more favorable regulatory environment for gas exports, but the success of US LNG exports also depends tremendously on global gas demand.
By Rebecca O’Connor, Inter-American Dialogue
On September 27, Jacqueline Sanchez, Energy Policy Associate at the Institute of the Americas participated in a Women in Energy breakfast in Mexico City featuring U.S. Ambassador to Mexico Roberta Jacobson. Amb. Jacobson offered remarks on the importance of the energy sector and its myriad opportunities as a key element for the broader US-Mexico bilateral relationship. At the breakfast, Sanchez joined a distinguished group of female executives, government officials, and representatives from academia and civil society. The event was hosted by Chevron, an Institute of the Americas Energy Steering Committee member and featured a wide ranging discussion of key issues facing Mexico’s energy sector.
Excerpt from CalChamber article
Globally, trade is at a very interesting juncture, Ambassador Jamal Khokhar, president and CEO from the Institute of the Americas, said to the attendees.
For more than the last half century, the U.S. has led the world in breaking down barriers to trade and in creating a fairer and freer international trading system based on market economics and the rule of law. Increased market access achieved through trade agreements has played a major role in the nation’s success as the world’s leading exporter.
This trend is changing, however, to a more inward view because “large segments of the population have not necessarily benefitted from the gains of trade liberalization that were promised them in the trade agreements,” the Ambassador said.
Ambassador Khokhar explained that it is not the trade agreement’s fault for this predicament. “We are better off with a liberalized trade agenda,” he said. The challenge instead is how to make the trade adjustments in terms of education, job training, job creation, adjusting with new technologies, recognizing that some manufacturing jobs will be lost and new ones created and there’s a balance between the two sides.
Why are trade agreements so difficult to negotiate, the Ambassador asked rhetorically?
“Trade agreements are the only instrument that oblige countries to internalize, ratify into domestic law the agreements reached among countries. So, they are enforceable and there are dispute resolution systems in place,” he said.
It is this package deal that allows countries to load up a variety of topics and problems into a trade agreement. However, the biggest change in trade is new technology, and that is presenting a whole host of new problems.
Global value chains account for 80% of world trade today. Global value chains are companies selling to each other, within the company, or all the people and all of goods from around the world that go into the production of a product or a service.
“In a world where goods, or even cattle cross the border before they’re processed and delivered…how do you define a rule of origin?” Ambassador Khokhar asked. “So global value chains are extremely important and yet our trade agreements are not set up any longer to deal with sophisticated global value chains.”
The debate the world is having about trade and whether it benefits or hurts countries needs to refocus on how technology changes everything.
The Ambassador sympathized that there are people who are hurt, who have lost jobs and explained that we as a society, not necessarily just government, need to think of how to address that and we need to think about how to retrain and create new jobs in some of these new companies.
“Look backwards if you want to, but I think the rest of the world is moving on and I think countries like the U.S. and key states like California control a lot of global leadership,” Ambassador Khokhar said in closing.