ECPA Forum Examines Natural Gas Outlook in the Region

Thursday, August 14, 2014

The event was sponsored by the OAS Department of Sustainable Development, the clearinghouse for the Energy and Climate Partnership of the Americas (ECPA).
In recent years, natural gas output has soared in the United States, largely due to the increased production of shale gas through such techniques as hydraulic fracturing and horizontal drilling. The booming supply could significantly benefit other countries in the region in the form of increased exports, according to several of the experts.

While natural gas is much cleaner to burn than coal or oil, several environmental hurdles related to its production and transportation must be overcome before it can reach its full potential, Becker said. One of these is the problem of methane leaks at the wellhead or in pipelines, which can end up erasing the CO2 advantage of gas over coal, Becker said. “Plugging those leaks is an extremely important issue,” he added.

The July 30 forum—“The Impact of Expanded Natural Gas Resources on the Energy Future of the Americas”—was the fourth and last in a series designed to foster debate and promote better public understanding on topics related to energy and climate change.

In opening remarks at the event, Ambassador Nestor Mendez, the Permanent Representative of Belize to the OAS, talked about the capacity of the Central American Electrical Interconnection System (SIEPAC for its Spanish acronym) to “transform” the energy market in Mesoamerica. The system, which eventually is expected to connect power grids from Mexico to Panama, will give a small country such as Belize access to the advantages that come with economies of scale, Mendez said. Many energy solutions that may not be feasible for a country of 240,000 people would be extremely attractive for a potential market of over 75 million, he explained.

Although some complex issues are still being negotiated, such as trans-boundary regulations and fees, “I think that the political will is there” for SIEPAC to become fully realized, the diplomat said. The subject of energy integration affects everyone, not just government ministries but also the private sector and indeed the whole country, Mendez said. “At the end of the day, the benefit will be for our people—cheaper energy, consistent energy, secure energy, which all of us need for development.”

Central America and the Caribbean are two regions that stand to benefit particularly from the “sudden change in the gas landscape,” according to Ramón Espinasa, a leading oil and gas specialist at the Inter-American Development Bank (IDB). Many of the countries in these regions currently depend on expensive oil imports and old technologies, he said at the forum, noting that in some Caribbean countries the cost of electricity is two to three times higher than that in the United States.

Gas can be transported via pipelines or turned into liquefied natural gas (LNG) for shipment and then converted back to gas for power generation. Espinasa said that as a result of the plentiful supply of gas in the market, along with technological changes that make transportation and power generation more feasible on a small scale, natural gas has become an attractive alternative to help bring prices down in these smaller countries. Trinidad and Tobago, which used to export most of its gas to the United States, could increase exports to other Caribbean countries, while Peru could supply gas to Central America, he said.

Still, some economies of scale are needed for efficient transportation, storage, and power generation, said Espinasa, who called for coordinated actions and solutions among countries. A series of “hubs” would enable LNG to be transported in large quantities to a couple of key ports in the Caribbean then distributed in smaller vessels to individual countries. For Central America, the logical solution is to generate power at two hubs, one in the south (perhaps Panama) and one in the north (El Salvador or Guatemala), then distribute it to the rest of the region through SIEPAC, Espinasa said.

Another panelist, Francisco González, Senior Professor of Latin American Studies at Johns Hopkins University, discussed four key factors that drive energy integration: treaties, laws, and regulations; prices; financing; and infrastructure. He called SIEPAC the “gold standard” for energy integration in the Americas, yet pointed out that the project had been in the works for two decades, an indication of the complexity of this undertaking.

For her part, Lisa Viscidi, Director of the Energy, Climate Change and Extractive Industries Program at the Inter-American Dialogue, said natural gas is becoming increasingly important in South America as a supplement to hydropower. While the region’s heavy dependence on hydro makes it a relatively clean power producer by world standards, changes in climate patterns—especially in countries heavily affected by El Niño—have produced more droughts and made hydropower a less secure source than before, Viscidi said. Other concerns, such as the environmental and social impact of large dam projects, are seen as additional obstacles to hydro expansion, she added.

“That’s one of the reasons why gas is looking like a more attractive option for Latin America,” Viscidi said. Gas demand in the region increased by 60 percent from 2000 to 2012, she said, adding that natural gas is projected to become an increasingly important source for power generation.

See event agenda, here.
See speakers’ biographies, here.