Emerging Markets Focus
policy. This translates into new funds for hydroelectric plants in the south, boosting coal-powered thermoelectric plants, especially in the north, and combined-cycle plants.
Brazil has been self-sufficient since 2006 and became a net oil exporter in 2009. In the January 2011 Short-Term Energy Outlook, EIA projects that Brazil will continue to be a net exporter through the end of 2012. According to the Oil and Gas Journal (OGJ), Brazil has 12.9 billion barrels of proven oil reserves and it has South America’s largest proved reserves of coal. It is also the world leader in production and a pioneer in the use biofuels such as biodiesel, which is an oil derived from plants such as sunflower, macaúba, soy beans, colza, and as alcohol extracted from sugar cane. Together with the United States, the two countries produce 70% of the world supply of ethanol. However, the main factors for the development of this fuel are the diversification of the energy matrix and the reduction of the country’s dependence on oil by-products. Brazil has the ideal conditions for the development of biofuels projects such as available manpower, abundant land to cultivate and favorable climate conditions.
Experts present different scenarios for the future energy landscape in Latin America. Many suggest that the notion of regional integration will be superseded by global integration. The countries that have adopted the most prudent policies are those that have liberalized their oil and gas industries, those that have started to look outside the region to secure additional supplies or both. Brazil, Colombia, Peru, and Chile are all included in this group.
Other experts believe aspirations toward regional energy integration have to some degree fallen by the wayside due the current wave of nationalizations and populist energy policies. Some countries are striking bilateral agreements but working toward self- sufficiency - motivated by a mixture of politics and economics - as Ecuador, Bolivia, Argentina and Venezuela that have adopted policies that are impractical and unsustainable. Venezuela and Bolivia ‘oil diplomacy’, for example, decided to nationalize some portion of its hydrocarbon industry that entailed heavy-handed expropriation of assets from private companies. While Argentina heavily subsidized domestic energy prices and Ecuador’s that has been following an aggressive policy against foreign investment.
These divergent paths have produced incompatibility in the domestic political economies of the major exporters and the major importers as consequence it have limited the potential for developing regional infrastructure. The needs of the populace will drive governments to moderate or find middle ground. Latin America still has launched regional entities with the objective of improving energy integration and collaboration, as the Initiative for Regional Infrastructure South American Integration (2000) and South American Energy Council (2007). However, the overwhelming consensus is that energy coordination among Latin American nations remains limited and that these institutions have been ineffective, largely because they could not overcome the challenges associated with asymmetrical regulatory frameworks, policy coordination and implementation of rules and procedures.
Some experts say that public policy can play a key role in numerous ways, notably by focusing on the following: providing a framework favourable to investment in new resources; providing a policy climate that ensures continued active co-operation between technology developers and hydrocarbon resources holders; actively participating in developing and facilitating the implementation of technologies that improve the safety of installations; vigilantly supporting industry's efforts to reduce its environmental footprint and thus to access resources in new areas.
Brazil’s Energy Overview
According to EIA, International Energy Statistics, the largest share of Brazil’s total energy consumption comes from oil (50 percent, including ethanol), followed by hydroelectricity (34 percent), natural gas (8 percent), coal (5 percent), other renewable (2 percent) and nuclear (1 percent). Natural gas is currently a small share of total energy consumption, but attempts to diversify electricity generation from hydropower to gas-fired power plants could cause natural gas consumption to grow in the coming years. The aggressive policy it has followed to develop Petrobras is changing energy geopolitics in the region. Brazil is the ninth largest energy consumer in the world and recent discoveries of large offshore, pre-salt oil deposits could transform Brazil into one of the largest oil producers in the world.
Drillers and Dealers :::
::: February 2011 Edition
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