What's next for Latin America's energy transition?

Luz Stella Murgas, the head of Colombian natural gas association Naturgas and a candidate for the International Gas Union presidency, explains why Latin America's vast gas potential makes the region an important piece in the global energy transition. 

This is the second of a two-part interview. The first part can be seen here.

BNamericas: What role will Latin America play in the international energy transition in the next decade?

Murgas: From the Latin American perspective, the fight against climate change also requires a transition to a low-carbon economy. Natural gas is confirmed as an energy source that may be able to contribute to this energy transition process, while we seek the diversification of the matrix towards renewable energies, and also comply with the global commitments that each of the countries has.

The Latin American Energy Organization, which brings together all the ministers of the region, has indicated that renewable energies are fundamental in Latin America and the Caribbean because while natural gas maintains its important role within the matrix, which represents around 26% of primary energy, renewable energies should grow enough to be able to make this great transformation and resources and investments must be focused on that direction.

I see that Latin America is betting on a very rapid transition, but also taking advantage of the natural resources it has. Natural gas will also be able to mitigate the risks associated with price volatility, for example, of other commodities such as oil, and it can provide rapid response capacity and maintain the stability of many other systems, both electrical and of course stability in peace processes, stability in processes of strategic alliances for poverty issues that concern the entire region. And most importantly, natural gas will continue to back up hydroelectric plants.

I believe that in the face of climate change, Latin America is going to try to rush to fulfill its commitments and natural gas is going to play a very important role.

BNamericas: Beyond what may happen in Colombia, which Latin American countries are going to be most active in the natural gas segment in the coming years?

Murgas: It should be noted that there are very active participants in the natural gas chain, producing countries such as Trinidad and Tobago, Mexico, Argentina, Bolivia, Peru and Brazil, which has been a producer for a long time, and they all supply around 5% of the total gas consumed in the world. Of the total natural gas imports in Latin America and the Caribbean, 73% come from producing countries in the same region.

So this perspective shows that natural gas continues to play an important role and that by 2050 it is estimated that we will still have a representation of around 20% in the matrix of all energy sources. I would close that point by telling you that it is important that the countries of the region have solid institutional regulatory frameworks to be able to guarantee the efficient and sustainable use of natural gas.

And in addition, the region needs to implement actions in favor of the decarbonization of our own sector as well, and I believe that on that front there is a broad framework of collaboration to be able to consolidate that purpose in the face of the energy transition. Latin America is going to be fundamental in the LNG market but it is also going to be fundamental as a leader in the energy transition process, taking into account its socioeconomic conditions.

BNamericas: According to Colombia's energy ministry, a natural gas deficit could occur as early as 2027. What should Colombia do to avoid such a scenario?

Murgas: The answer lies in optionality. This is not focusing on a single project or a single development. What we have here is to open all viable sources of natural gas. This implies that we have to prioritize, of course, the gas discoveries that we have had offshore in the Caribbean Sea and also in continental areas, mainly on the Atlantic coast and in the plains of the foothills to be able to guarantee supply.

But it's also important that we focus efforts on incorporating new reserves by increasing exploration. Regarding the guarantee of supply, it's important that the projects that we have identified as strategic for that purpose materialize. How do these projects materialize? Regulatory measures that allow expanding the capacities of the transportation infrastructure, which will make it possible to make gas sales from larger fields more flexible to have additional gas at any time of the year. These actions will mean that we can change the maturation stages, anticipating the commercial agreements for the sale of gas for those projects that will be developed in the following years. There are regulatory measures and also measures to incorporate reserves that are very important to stimulating and energizing exploration under the hydrocarbon exploration and production contracts.

BNamericas: What type of measures would the sector like to see implemented?

Murgas: For example, in cases where the contractor decides to retain areas to continue carrying out exploration, the commitments required to retain that area are not so onerous because what that does is stop the investment decision. We have asked the agency [regulator ANH] for those areas where investment is currently frozen or suspended due to public order problems or problems associated with the delay of environmental licensing, to be able to carry out a type of swap of exploration areas.

This investment can be transferred to another non-adjacent area of the contract that is available under the same name of the contract to guarantee that the activity is carried out and with the aim of maintaining sovereignty and energy security. So there is a cluster of projects that today require decisions, whether regulatory or contractual, on the part of the national government.