Bottom line: With final plans for a regasification plant in the Montevideo Bay approved, Uruguay is aggressively working to position itself as an energy hub despite a lack of conventional resources.
Analysis: On 14 May, France’s GDF Suez won a contract to build a liquid natural gas (LNG) regasification plant off the Montevideo shore. The plant should be operational by March 2015, with an expected processing capacity of 10 million cubic meters of LNG per day and storage for 267 million cubic meters. Uruguay itself uses just 300,000 cubic meters a day. GDF Suez may seek subcontracts for the $1.125 billion construction contract. Ancap is also looking for LNG providers to bring in 8 cargos of LNG the first year.
This is the first milestone in making Uruguay a regional energy exporter. The Montevideo plant is 150 kilometers from Buenos Aires, Argentina, where demand for electricity and natural gas is high. Currently, Uruguay can cover domestic demand most of the year with installed hydro, solar, and thermal power, though drought has a severe effect because most of its energy comes from hydroelectric dams. The national electric company, which already buys thermal energy from a number of small providers, is also seeking partners to add 200 MW in solar energy production and 500 MW from wind power projects for which the government will offer 25-year contracts.
Recommendation: Although Uruguay is not a traditional destination for energy investors, its political and economic climate, along with its geographic position near energy-hungry Argentina and Brazil make it an excellent option for small-to-medium investors, and especially those with interest in renewable energy projects.