Furnished with abundant, but so far under-exploited, potential resources, Latin America has a complex relationship with natural gas. The region’s combination of significant untapped potential for energy production and demand, strong economic growth profile, and regulatory, political and fiscal complexities contribute to a challenging yet potentially highly rewarding environment for gas and LNG market participants across the entire value chain from E&P to downstream.
While Argentina has the third-largest recoverable shale gas reserves in the world, it has nevertheless found itself as a significant premium-market importer of LNG.
Meanwhile, Mexico has found itself contemplating as many as four LNG export projects along its Pacific coast, while simultaneously looking towards US pipeline imports to satisfy its burgeoning domestic demand.
Elsewhere, Peru continues to export LNG at a reliable pace, and LNG has become increasingly critical to Brazil’s power generation mix as a reliable, flexible source of power to complement and provide a crucial balancing fuel to the country’s abundant yet intermittent hydroelectricity capacity.
In the Caribbean, the landscape is also changing. While the natural gas industry in the region had previously centred on the 15 mtpa LNG export facility at Trinidad’s Point Fortin, a growing number of suppliers of everything from integrated LNG-to-power solutions to small-scale services are increasingly focusing on the substantial growth potential of the Caribbean islands.
Like Latin America, the development of these nascent yet highly promising market opportunities presents considerable challenges which require a high level of detailed market evaluation and business planning.
- Gas-fired generation is increasingly viewed as the best option to secure a reliable supply of electricity in Latin America, with a growing number of countries seeking to establish LNG import terminals and CCGTs in the coming decade. Evaluating the commercial aspects of gas in the domestic energy mix is critical to success.
- During this decade, a growing number of both experienced and first-time buyers in the region will enter the market to procure new gas and LNG supplies from a wide and growing range of potential sources. Assessing completing supply propositions and their commerciality within the wider value chain will require a detailed understanding of both global markets and commercial and contractual arrangements.
- Gas-to-power project developers and E&P companies active in Latin America and the Caribbean will need to secure considerable debt and equity financing as activity in the region accelerates. Understanding the risks at each stage of the full LNG value chain in the context of new markets presents a critical challenge to investors, suppliers and EPC companies alike.