Gas Natural en América Latina e Integración Energética Sustainable Energy, Oil and Gas and Mining Division (SEGOM) VII Foro Regional sobre Integración Energética República Dominicana Noviembre 25-26, 2013
Outline Sustainable Energy, Oil, Gas and Mining (SEGOM) Relevance of Natural gas in Latin America and the Caribbean Some aspects of Regional Integration Conclusions 2
Sustainable, Energy, Oil, Gas and Mining SEGOM = The Bank s Sustainable Energy/Gas/Oil/Mining Department SEGOM objective is to enhance the extractive industries contribution to poverty alleviation and economic growth through the promotion of good governance and sustainable development GREEN GROWTH GOVERNANCE Economic, Environmental and Social Sustainability ENERGY ACCESS ENVIRONMENTAL AND SOCIAL RESPONSIBILITY With linkages to individual Country Partnership Strategies, Sector Strategies and other global programs and initiatives on Climate Change, Green Growth, Fragile and Conflict-Affected Countries and other Global Public Goods 3
Global Programs and Facilities That Support the Work Extractive Industries Transparency Initiative (EITI) Global standard for good governance in EI. Revenue transparency, tripartite process and platform for governance and accountability. Extractive Industries Technical Advisory Facility (EI-TAF) Better deals. Reducing asymmetry of information. Rapid response and support for contract negotiations Global Gas Flaring Reduction (GGFR) Capturing flared gas for energy access & power/industry http://www.eisourcebook.org/ 4
Global Gas Flaring Reduction Partnership (GGFR) Created in 2002 at the World Summit on Sustainable Development in Johannesburg 10 years anniversary last year (Global Forum in London) Main Objectives: Reduce carbon emissions and environmental impact of gas flaring Improve energy efficiency and access to energy Means: World Bank-led Public Private Partnership to facilitate gas flaring reduction Phase 4 approved by partners (2013-2015) Mission Statement GGFR is a catalyst for reducing wasteful and undesirable practices of gas flaring and venting through policy change, stakeholder facilitation, and project implementation 5
Why focus in Natural Gas NATURAL GAS, LAC AND WORLD BANK MISSION To comply with the Green Growth agenda and the future energy strategy of the Bank, recognizing the following: NG is a key fuel in a carbon-constrained world ENVIRONMENT Rapid urbanization will increase importance of NG NG use and trade needs setting up gas infrastructure Developing countries are endowed with large amounts of unexploited NG WBG in NG can contribute to energy poverty reduction POVERTY REDUCTION Improve efficient, reliable and affordable clean energy access to the poor ENERGY SECURITY ENERGY COST Significant work remains to encourage and raise awareness and overcome legal, regulatory, and cultural barriers, which still exist in the LAC region 6
Energy Sector Directions Paper Objective and Principles Support client countries in securing the affordable, reliable, and sustainable energy supply needed to end poverty and build shared prosperity. Equity across space and time as core value Closely aligned with SE4ALL initiative Guiding principles 1. Engage holistically to catalyze transformation of energy sector in the context of longterm system-wide planning, and apply a framework for assessing climate impacts of projects in that context 2. Emphasize improvements in financial, operational, and institutional environment 3. Seek market solutions and help foster private sector participation and investment 4. Embrace a multi-stakeholder, inclusive approach to energy development 5. Tailor approach to individual country circumstances 7
Production Natural Gas is abundant in the region RESERVE GROWTH Peru 4% Colombia Brazil 2% 4% Bolivia 9% Argentina 5% Global gas reserves have grown by 60% in past 20 years o LAC by 69% (same period) o Middle and low income countries (ex-iran) more than doubled Global reserves-to-production ratio (R/P) is 60 years o LAC R/P is 50 years (14 years without Venezuela) Distribution of reserves is a challenge Trinidad & Tobago 5% Other S. & Cent. America 1% LAC Natural Gas Reserves Venezuela 70% 60,0 50,0 40,0 30,0 20,0 10,0 0,0 LAC Proven Natural Gas Reserves and Production Production (bcm) / year Reserves (tcm) Source: BP Statistical Review of World Energy 2010 6,00 5,00 4,00 3,00 2,00 1,00 0,00 Reserves 8
Unconventional Gas in LAC Region UNCONVENTIONAL GAS INITIAL ASSESSMENTS Proved Natural Gas Reserves (tcm) Very large estimates for countries with gas infrastructure: Argentina, Brazil, Mexico, and Chile New endowment for Paraguay and Uruguay Recoverable Shale Gas Resources (tcm) Country Production (tcm) Consumption (tcm) Imports (Exports) Venezuela 0.02 0.002 9% 5.1 0 Colombia 0.01 0.009-21% 0.1 1 Mexico 0.05 0.061 18% 0.3 19 Argentina 0.04 0.043 4% 0.4 22 Brazil 0.01 0.019 45% 0.4 6 Chile 0.00 0.003 52% 0.1 2 Uruguay - 0.000 100 1 Paraguay - - - - 2 Bolivia 0.01 0.003-346% 0.8 1 Total 0.14 0.139 7.1 54.0 Will UNG be a game changer in LAC? What efforts exist in LAC to develop unconventional gas? Is it relevant? What is needed to enhance access to this new type of resource? What are the cost implications/limitations? Source: EIA Report on World Shale Gas Resources Assessment 2011. 9
Natural Gas is a secure and affordable energy NATURAL GAS TRANSPORT INFRASTRUCTURE Infrastructure expansion has high potential Gas integration in Southern Cone studied by the WB in 2007 Evaluated merits of integration and potential projects o Advantages: economic, guaranteed supply, energy cost reduction, attraction of investment, and increase competitiveness. o Disadvantages: restrictions in related policy implementation by each country o Opportunity cost of non-integration $ 6 billion in 2015 o Total CAPEX $ 21 billion Merits exist for introducing gas in Central America (based on existing feasibility study) o Bank launching LNG study for the Region 10
Natural Gas is a flexible and affordable energy LIQUIFIED NATURAL GAS (LNG) Recent developments in LNG Industry is making gas import a more viable option for several countries in the region o Undedicated/un-contracted LNG supply o Global surplus of production is US allow exporting unconventional gas o New lower cost and smaller scale regasification technology (floating facilities) o Relatively higher priced energy alternatives Total of 8 operating terminals + 2 in construction Investments projections in $ billons 2008-2030: LNG terminals 9$ (7% of global) Are LNG terminals a response to lack of integration and insufficient infrastructure? Will growing LNG terminals prevent further infrastructure integration? Source: International Group of Liquefied Gas Importers 11
NG is unavoidable in the LAC energy mix NATURAL GAS FOR POWER GENERATION Natural Gas fueled 22% of electricity in LAC in 2008 (projected to reach 30% in 2030) Most generation capacity will be in hydro and natural gas (36 and 30 % respectively) o In Mexico, NG for power projected to represent 51% of energy mix by 2030 Without focused intervention, coal gains market share in the power sector; in LAC 3.1% to 5.6% but NG has increased from 8.8% to 18.5% when Oil decreased from 20% to 14%. Region-Wide Electricity Generation Mix (2008-2030) Renewables alone cannot support the Source: WB Study Meeting the Electricity Supply/Demand rapidly growing energy needs of LAC Balance in Latin America & the Caribbean, 2010 countries ICEPAC Scenario Supply Side 12
Energy Integration A few words about energy integration Latin American countries have different natural resources that allow an interesting mutual exchange Energy integration can be the backbone of Latin American integration There is more integration in the southern part of Latin America Energy integration can refer to the simple trade or a genuine energy planning and coordination according to the capabilities and needs of the people, taking into account the rational and efficient use of natural resources The infrastructure integration mechanisms most recognized early works were large binational hydroelectric dams in the Southern Cone (Itaipu, and Salto Grande Yaciretá) Other infrastructure are binational transportation, which includes pipelines and electricity transmission lines of high voltage Most energy cooperation projects are bilateral 13
Energy Integration (cont.) Future projects of energy integration Political interest is growing to promote an integrated power grid within the reverse J-curve coalition of Colombia, Peru and Chile, with the potential to expand to include Argentina and Uruguay In natural gas markets, more flexible arrangements like LNG are also likely to move forward than major cross-border pipelines (major exception is US and Mexico) The past two decades have demonstrated how quickly the physical, economic and political drivers for energy integration can change o Today s expectations for the path forward are no different Concerns regarding the environmental effects of shale gas production could curtail its development in one or more countries, putting some integration projects at risk and supporting others as the regional natural gas supply equation shifts A final unknown includes climate change policies and whether they will treat natural gas as a beneficial, low-carbon transition fuel, or as a dangerous distraction, giving a false sense of security while making zero-carbon energy development more difficult. 14
Forming a single energy market (few remarks) Most of the regional energy markets exist in the power and gas sector. Some examples include: o Europe : major power and gas integration o Asia: Central Asia South Asia Regional Electricity Market (CASAREM) o Africa West Africa Pipeline, Southern Africa Pool o Latin America: SIEPA electricity project in Central America Key elements of single energy markets o Policy framework o Legal framework Treaty level intergovernmental agreements Secondary cooperation agreements Commercial cooperation between national champions / national energy companies 15
Forming a single energy market (cont.) Common issues experience o Temptation to protect national interests rather than pursue common regional interest, for example: Argentina determined that its natural gas consumption is a priority, several cases of resource nationalism Economic Barrier trade conflicts often due to different pricing policies (e.g. Venezuela and Colombia, etc.) Political Barriers diplomatic conflict and tension Institutional barriers lack of or insufficient authority Regulatory barriers national regulatory bodies sometime contribute to barrier to integration, conflicting regulatory policy objectives 16
Natural gas integration USA and Mexico NATURAL GAS TRANSPORT INFRASTRUCTURE Gas infrastructure between USA and Mexico expanding (currently 13 gas pipelines) Pipelines gas imports have skyrocket (greater availability of gas in USA from unconventional gas) 17
Electricity integration in Central America Based on treated Tratado Marco Six nations in the region interconnected through 1800 Km transmission line (connecting 40 million people) Potential to tap into economies of scales and large hydropower resources, as well as LNG import for centralized power generation Supports the provision of a reliable and cost-competitive supply of energy Challenge persist in how to enable the development of a regional electric market o Currently limited amount of electricity exchange among countries Key aspect is the harmonization of institutions, policy and regulation 18
Introduction of LNG in Central America Background Region faces crucial energy challenges Study objectives o Determine potential demand for LNG in the region o Identify suitable sites for potential LNG project development o identify the regulatory, legal, and institutional requirements that will support the creation and efficient operation of an LNG value chain with private sector investment Study to be launch in kick off meeting and to finish with a workshop Timeframe o Work to start December and to finish six months 19
Concluding Remarks The World Bank has ample expertise the oil and gas sector, which can provide support to the region Increased natural gas development and use meet WB mission and strategy of providing reliable, affordable and clean energy access to poor Access to concentrated natural gas reserves need infrastructure to enable gas trade LNG imports represent a potential supply to support demand growth (in power, urbanization, industry, etc.) Pace of growth and coal/fuel-oil replacement could be accelerated with World Bank assistance along natural gas value chain Energy integration can be backbone of regional integration 20
Gracias por su atención Email: fsucre@worldbank.org 21