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Is The Geopolitical Risk Premium In Oil Overrated?

Is The Geopolitical Risk Premium In Oil Overrated?

While geopolitical risk definitely remains…

Francesco Stipo

Francesco Stipo

Francesco Stipo is a lawyer, author and energy expert. He published several articles on energy and international affairs in American journals and newspapers and is frequently invited…

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Latin American Energy Outlook: Natural Gas Leads The Way

Gas Pipeline

On Thursday, December 8 Dr. Fernando Cesar Ferreira, Executive Secretary of the Latin America Energy Organization (OLADE), presented the energy outlook for 2017 to the Latin America Energy Forum in Houston.

OLADE is a public intergovernmental organization founded in 1973, composed of 27 member countries which are represented by their Ministers of Energy.

Dr. Ferreira discussed the current situation in the energy sector in Latin America and the Caribbean, highlighting the fact that over 23 million people in the region are still living without access to electricity. Millions of people use traditional biomass (in particular wood and plant) for cooking and heating. He forecasted that electricity demand will grow by 4.1% per year and electricity generation by 4.5% per year.

Consumption of oil and natural gas in Latin America exceeds the world average, while coal and nuclear energy are less common sources of energy.

Population access to electricity has dramatically increased since the seventies. In 1970, only 50% of Latin American people had access to electricity, while the current average electrification rate is 88%.

Uruguay has the highest electrification rate, with 99% of its population with access to electricity, followed by Barbados, Costa Rica, Chile and Brazil. Haiti is the Latin American country with the lowest electrification rate, just 28%.

Related: Rex Tillerson: ‘’Russian Spy’’ Or Diplomatic Genius?

Hydroelectric power plants are the main sources of energy generation in Latin American countries, with the exception of Mexico and Panama, in which wind turbines overtook hydro as a source of energy production.

Venezuela is the country with the largest proven reserves of natural gas. However, such resources remain mostly unexploited due to the country’s financial crisis.

Mexico is the largest natural gas producer followed by Argentina, which has seen a steep decline in production in recent years.

Mexico, Argentina and Brazil have seen the strongest increase in natural gas consumption and this trend is expected to continue in the next 10-15 years.

Forty percent of natural gas is used for electricity production. However, the demand for natural gas will increase in the transportation sector. In fact, in Latin American countries, the use of compressed natural gas (CNG) for vehicles is widespread and it is common to find CNG as a fuel in gas stations.

Dr. Ferreira forecasted that natural gas would lead energy demand in Latin America in a “business as usual” scenario, characterized by lack of public intervention in support of alternative energy sources. Latin American countries need to invest in field exploration to boost their domestic production and they need to build new regasification plants in order to import liquefied natural gas (LNG).

He underlined the determination of several Latin American governments in implementing the provisions of the COP21 agreement to reduce carbon emissions and increase the use of renewable energy. However, the growth of renewable energy is contingent upon government intervention and the implementation of COP21 would not reduce the growth of natural gas consumption in the region.

Latin American countries will need substantial investments in infrastructure to guarantee a sustainable energy future to their populations.

By Francesco Stipo for Oilprice.com

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