LNG in Latin America: What Obama Should Have Mentioned in His Latin American Tour

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Mar 24, 2011, 05:34 ET

SANTIAGO, Chile, March 24, 2011 /PRNewswire/ -- (Argus) -- Energy featured prominently in talks held by US president Barack Obama during his tour of Latin America on 18-23 March. But Obama's messages appeared mixed at times, and discussions with countries such as Brazil and Chile overlooked the potentially key role that natural gas can play in the region, according to the international energy reporting service Argus.

While in Brasilia, Obama gave notice that the US would become a major market for sub-salt crude output. But in Santiago, he called for a co-ordinated regional drive towards the use of "clean energy". In this proposed alliance of "equal partners", each country would contribute with their own particular "clean energy" resources — in the case of Brazil, biofuels, and in the case of Chile, geothermal power.

Alternative renewable sources on their own will not be enough to meet future energy demand in Latin America. But the political costs associated with many conventional energy projects — including large hydropower projects in Brazil, Chile and Peru — are increasing. Nuclear energy was increasingly being seen as a promising large-scale alternative, but public confidence has been shattered following the catastrophe at Japan's Fukushima plant. And coal's role will be limited by emissions concerns, particularly for the region's export-oriented economies.

Crossing the bridge

Missing from Obama's speeches was the role that natural gas can play as a bridge to a low-carbon future. And yet a new form of gas integration, driven by imported LNG as a strategic complement to local pipelines, is gaining ground across Latin America.

The US and multilateral agencies were strong backers of pipeline-based gas integration in Latin America in the 1990s. But progress has been limited by a range of factors, including politics and border conflicts. In the continent's southern cone, gas pipelines are now practically obsolete.

Even now, Latin America's gas reserves are unevenly distributed in countries such as Venezuela and Bolivia, where the operating climate for foreign investors is tough and often hostile. Brazil's emerging offshore sub-salt area is starting to redraw the reserves landscape, but it will be expensive and technologically challenging to extract these resources.

Gas integration in the region has become increasingly based on imported LNG rather than local pipelines. Brazil, Argentina and Mexico are adding new receiving terminals. And Chile is likely to expand one of its two existing LNG terminals. Uruguay and El Salvador are expected to join the list of regional LNG importers over the next few years. And Peru launched a liquefaction plant last year, becoming the second country in the region after Trinidad and Tobago to export LNG. A US trend to convert receiving terminals into bi-directional facilities could cement hemispheric energy integration without compromising important commercial links to Asia-Pacific and Europe.

Until the renewable energy dream espoused by Obama becomes a reality, Latin America will continue to journey down the practical path forged by LNG.

For more intelligent and thought-provoking opinion and analysis on Latin American LNG and energy markets, request a free trial of Argus LatAm Energy http://info.argusmedia.com/mailers/News/webBIR.html?ref=ALE_pressrelease_GA

Argus will be hosting a free webinar: "LNG in Latin America: How far can it go?" on 5 April 2011 at 11am EST. Register here. https://argusmediaevent.webex.com/argusmediaevent/onstage/g.php?t=a&d=660185550

For further information please contact: Patricia Garip in Santiago at + 56 2 243 6239 and email [email protected] or Gabriela Alcocer in Houston at +1 713 429 6308 and email [email protected]

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