L I\ - t (.. \..-L,I ;c' '; j - " J 52574 BOTILENECKS IN ENERGY TRADE AND COOPERATION: LESSONS FROM EXPERIENCE IN THE LATIN AMERICAN REGION Chakib Khelil Energy Unit Chief Infrastructure and Energy Division Latin America &: the Caribbean Region Technical Department World Bank ABSTRACT The paper examines the po_licy and strategy followed since bottlenecks, other than the technical 1973, their institutional set-up and economic feasibility of energy Wh2Ch emphasized state management of trade projects, which have prevented energy resources and petroleum in the past a greater development of products. pricing and electricity energy trade in the Latin American tariff setting policies. Most (lA) region. countries in the region are Despite large energy reserves and undergoing economic adjustment substantial self sufficiency, the lA programs where these bottlenecks will region only trades in 3% of its be reduced or eliminated altogether. supply in natural gas and electricity Consequently economic interregional and imports from outside the region trade in energy should see a maj or more than 30% of its requirements for development in the future with the petroleum products and coal. rhe s\J.pport of the private sector, paper concludes that the maj or multilateral and official cre~it bottlenecks are to be found in the lA agencies. countries energy - 1 INTRODUCTION limited. Natural gas and coal proved reserves to production ratios (75 and The world is undergoing maj or 504 years respectively) are very high political changes with the collapse b~ each supply only 18% and 3% of of the socialist block as a national the total primary energy requirements and regional political and economic of the region. While the power, and the development of the hydroelectric potential of the region western dominated large regional is recognized as one of the highest power blocks. As a result of this in the world, hydroelectricity trend, cooperation between and accounts for only 18% of the total int;:egration of Latin American (LA) primary energy requirements of the countries appears to take a new region. significant relevance both politically and economically. And In light of the large energy within this context.. the ene~gy reserves and self sufficiency of the sector has been traditionally LA region, the question then arises regarded as an econ9mic activity why the level of interregional trade where much progress could be in energy has been so disappointing. achieved. An analysis of several interregional energy trade projects (petroleum Interregional energy trade and products, coal, natural gas and cooperation in the LA countries has electricity) show that, even when been limited in the past to the they were technically and financial facilities provided by some economically well justified, the maj or oil producers to importers 1 , projects suffered considerable joint oil development between delays. Consequently the purpose of Colombia and Ecuador, exports of this work is to examine the maj or natural gas from Bolivia to bottlenecks, other than the necessary Argentina, binational hydroelectric technical and economic feasibility proj ects 2 and other electric power requirement of specific projects, interconnections, primarily in the that have prevented in the past a southern cone subregion and central more rapid development of America. interregional energy trade and cooperation in the LA region. First, The large LA continent is however, the paper presents a general globally self-sufficient in energy economic overview of the LA region and generates exports of oil and and its energy situation and future coal. Energy self sufficiency is prospects. however unevenly distributed; except for Mexico, Venezuela, Ecuador, LATIN AMERICA ECONOMIC OVERVIEW Trinidad & Tobago] Colombia and to a certain extent Argentina, the rest of The LA region covers an area the LA countries are net importers of equal to 15% of the world surface energy. from Mexico to Chile and has a population of 413 million (8% of In terms of specific energy total) and a GNP of US$752 billion sources, only about 62% and 64% of (5% of world) in 1988 (Table 1). imports of crude/oil products and About 80% of the region's GNP coal, respectively, originate in the originates in four leading economies region. On the other hand, of the region Brazil, Mexico, intraregional trade in natural gas l Argentina and Venezuela. These are and electricity 4 have been quite also the largest energy producers of - 2 the region (83%). Brazil represents unavailability of reliable and low the largest economy with US$3ll cost energy would constrain economic billion (41% of the region) followed growth. Seen under this perspective, closely by Mexico with US$148 t;be interregional energy trade and billion. While the LA countries c~operation option appears to take an economies grew at an average rate of important significance. 5.7% and 6% in the 1960's and 1970's, some suffered stagnation and others a LATIN AMERICA ENERGY SITUATION decline during the "lost decade" of the 1980' s compared to a slightly - Table 2 shows the region to be better growth on average in all globally energy self-sufficient in developing countries. 1987 and an exporter of oil and coal outside the region . At the same time The LA foreign debt is high, though, about 38% and 36% of oil and representing US$365 billion (1988). coal requirements respectively were The total debt service as a imported from outside the region. percentage of exports in 1988 were 36% for Argentina, 42% for Brazil, Out of the total primary and 43.5% for Mexico. The 1980's were commercial energy requirements, oil also marked in certain countries by met 58%, natural gas 18%, Hydro/Other periods of hyperinflation (Argentina 19% and coal 5%. Gross energy 290.5%, Bolivia 482.8% and Brazil reserves are unequally distributed 188.7% over the 1980-88 period). The with 90% of the reserves located in 6 energy sector was responsible for a countries (Brazil 24%, Mexico 20%, large percentage of the public sector Venezuela 19%, Colombia 15%, investments (about 30%) and the Argentina 8% and Chile 6%). public debt (20.0%) according to . OLADE (1988). Table 3 shows the commercial energy indicators of the LA The LA region countries are now countries. Per capita energy enacting policies supporting growth consumption varies between a low of of their economies in the 1990's 57 Kg of oil equivalent for Haiti to primarily through increased new a high of 5255 for Trinidad and inves tments and exports. Consequently Tobago while energy consumption per most countries are encouraging more unit of GDP varies between a low of open economies, a reduced role of the 0.15 Kg of oil equivalent per US$ for state in the economy and a larger Haiti to a high of 0.80 for Jamaica. involvement of the private sector While in some countries (para. on under a market environment promoting fuelwood) fuelwood is a major energy open competition. Despite their large source for residential consumers and debt overhang, the LA economies thus explain the low levels of their overall are expected to achieve commercial energy, in others moderate growth in the 1990' s. (Jamaica, Trinidad and Tobago) high Because of the high ratio of energy levels are explained by the existence consumption to economic growthS and of energy intensive industries. The the investment and debt constraints low level of energy consumption facing the LA countries, the compared to developed countries satisfaction of energy requirements demonstrates that there is room for would need a new approach putting more per capita energy expansion in greater reliance on energy efficiency most countries which should not improvement and greater participation exclude that a major effort should be of the private sector. Otherwise, made, especially in oil exporting · 3 · countries, to improve their energy Venezuela and slightly in Argentina efficiency use. due to expected larger investments in the sector Energy consumption to GDP growth ratio averaged 1.7 over the period - The region consumes about 4.4 1980~1987 while the corresponding MiD (7.5% of the world) shared evenly ratio for oil, coal, natural gas and among importers and exporters. Since hydroelectricity averaged 1973 growth in oil consumption lagged respectively 0.8, 4.0,4.0 and 3.7. behind that of electricity and Consequently, a moderate economic natural gas which substituted for growth in the LA region would be oil. Oil demand in the region however accompanied by a much more rapid is expected to pick up with economic growth of coal, natural gas and growth and increase at 2% to 3% a hydroelectricity than oil use. year over the 1990~1995 period. Supply and Consumption of Oil Refinery runs total 5.7 MBD of net products. There is a lack of Proven crude oil reserves (12.7% refinery cracking capabilities in a of world) are second only to those of number of LA countries with the Middle East in terms of reserves refineries. This is the main reason and life of reserves (35.4 years), for the imbalances between the demand with Mexico and Venezuela having 90% and supply of petroleum products in of the region total. Oil production the region. Net importers are Brazil, amount to 6.5 MBD (11% of the world). Costa Rica, Chile, Guatemala, Since 1973 there were major reserves Nicaragua and Uruguay while net and production increases in Mexico, exporters of crude but importers of Brazil, Colombia and Venezuela with products are Colombia, Ecuador and slight declines in Argentina, Peru. Net exporters of crude and fuel Bolivia, Chile, and Trinidad & oil are Argentina, Mexico, Trinidad & Tobago.· Oil supply would globally Tobago and Venezuela. The region increase by 1% to 1.5% a year until export/import balance of crude and 1995. Increases are expected petroleum products is as follows: primarily in Colombia, Brazil, - 4 The exports are mainly to the USA 1990). It is expected that supply (1986) supplied by Mexico, Venezuela, would increase in all natural gas Trinidad and Tobago, Ecuador, producing countries to meet their Peru, and Colombia. pr~jected demand. The data show that COlombia and Brazil would probably Natural Gas Supply and Consumption erther need to import or cut down on natural gas use. The natural gas reserves were estimated at 6316 BCM in 1987, about In terms of the development of 6% of the world total with a RIP of a natural gas market, Latin America 75 years (Khelil, 1990) much higher is about the stage Europe was 30 than world level. The largest years ago there are very large reserves are in Mexico and Venezuela potential markets for natural gas in with respectively 2.2% and 1.8% of Argentina, Brazil, Venezuela and world total. Mexico, and strategically well located natural gas reserves in Natural gas production net of countries such as Argentina, Bolivia, reinjection averaged about 85 BCM in Peru, Venezuela and Colombia. In 1987 with 82% produced by Mexico addition, the USA will remain well (27.4 BCM), Argentina (20.7 BCM) and into the twenty first century a large Venezuela (21.8 BCM). Average potential market (Huntington, 1990) commercial utilization was about 82% for natural gas exports from the LA compared with world average of 84%. region. The following illustrates one Table 4 and 5 illustrate the probable scenario for interregional potential natural gas supply and gas trade (Million m3/year) in the markets by the year 2000 (Khelil, southern cone LA countries: The southern cone countries will requirements as well as exports in thus constitute the most dynamic the form of LNG to the USA or Far natural gas market in the next 20 East. The Venezuelan enormous gas years; but in the long term. the reserves would underpin a major giant Peruvian natural gas reserves development of the local natural gas would be tapped to supplement the market and possible exports to Brazilian natural gas market Colombia but would also justify an - 5 LNG export project oriented towards operation and 6931 under the US market. Already Venezuela has construction (1986). been discussing with Shell, Exxon and Mitsubishi the possibility of a joint _' Interregional trade in venture, even though this'requires an erectricity represents only 3% of the amendment of the present Venezuelan tc}tal generated in 1987, mainly in petroleum legislation. the form of imports by_ Brazil and Argentina from Uruguay and Paraguay. Coal Supply and Consumption Firewood _ Coal consumption has increased from 8.6 MTOE in 1973 to 20.2 MTOE in Firewood represents about 14.5% 1987. 90% of which is in Brazil, of the total primary energy (TPE) Colombia a'Bd Mexico. and satisfies production with an average growth about 5% of the total primary energy rate of 5.7%. Firewood represented requirements. Colombia is the major more than 40% of the total primary coal exporter (7MTOE in 1987) to the energy production in E1 Salvador, USA and Europe. Exports from die Guatemala, Haiti, Honduras, region total about 12.5 millions tons Nicaragua, Panama and the Dominican of coal (7.9 MTOE). Despite large Republic. Current economic situation reserves of coal (504 years at 1989 has led to growth in consumption, consumption), the region imported 38% thus' contributing to an aggravation of its coal requirements (Table 1) of the problems of deforestation, from outside the region. Coal erosion and degr~dation of consumption growth which averaged hydrographic basins. 6.0% a year during the 1980-1987 Residentia1/commercial/publicsectors period should maintain this rate consumed about 75% of the total during the 1990-1995 period. firewood in 1984. Consequently there is considerable room for expansion of the Biomass interregional coal trade. Alcohol made from sugar cane has Electricity Supply and Consumption developed as a fuel in transportation mainly in Brazil. By 1988 Alcohol Electricity generation more than constituted about 20% of total doubled between 1973 and 1987 transport fuel requirements after a (194,397 GWH to 520,292 GWH) with rapid growth (38% a year over 1975 hydroelectricity contributing 63% of '1988 period). Alcohol substituted for the total. Consumption (12.8% of gasoline used in passengers cars but world) is concentrated in the required large government subsidies. residential and industrial sectors (94% of the total). Installed ISSUES IN ~NTERREGIONAL ENERGY TRADE capacity total 65 GW (1985) out of a total insta1lab1e hydroelectric Energy Policy and Strategy potential of 328·806 GW (35% of world total) . Brazil has the largest After the 1973 oil crisis, instal1ab1e capacity (213GW) with energy policy obj ectives of the LA also the highest rate of harnessing oil importing countries were resources (23.5%). Argentina, Brazil, generally to achieve energy self Cuba and Mexico have nuclear power sufficiency mainly through oil gener~tion with a total of 1531 MY in substitution by electricity. This was generally justified on the assumption - 6 that high oil prices would prevail in natural gas, petroleum products and the future. For oil exporting electricity made trade through a countries, this meant more reliance third party impossible. on oil resources to satisfy their energy needs since they generally - Following the 1973 crisis, there benefitted from the high oil prices. was a perceived risk in the region in re.lying and being dependent (gas Substitution policies followed pipeline or power interconnection) on by Brazil, for example, meant neighbors for part of one country's replacing imported fuel oil by energy needs without having a electricity even if that meant meaningful leverage for countering subsidizing industries to promote the any possible threat of energy use of electricity and an Alcohol cutoffs. program that meant a more costly fuel than gasoline. It was also at that Institutional Set Up time that Brazil considered natural gas imports from both Algeria and The State played a dominant role Bolivia. While imports from Algeria in energy through highly centralized fell through, a firm contract for institutions (Ministries, National imports (to start in 1993) from Oil Companies, National Electricity Bolivia was signed only recently. Companies). The state cumulated the Argentina promoted the use of policy and the regulatory roles as natural. gas to replace fuel oil used well as the functions of the only in industry and power generation and shareholder in the state controlled complemented its production with energy enterprises. Except in natural gas imports in 1977 from upstream and some downstream Bolivia. activities in the petroleum sector, the private sector did not play any The LA countries relied heavily major role in the provision of energy on state enterprises or regulated services. market mechanisms to achieve those policy objectives. There was a lack In the petroleum and gas sector of consideration of all possible the national oil company (NOC) was energy sources in energy planning, delegated the regulatory role in available either locally or terms of·award of contract areas to regionally. Energy planning were not the private sector or in terms of gas consistent with the macroeconomic imports. constraints and did not take into account uncertainty of oil prices Consequently large investments and risk associated with certain were carried out as part of the energy options. Locally produced public sector investments program and natural gas and coal, in some led to a large portion of the public countries, were not given the same debt being due to the energy sector importance as power or petroleum in (OLADE,19BB). This would weigh very energy planning; and even much less heavily in the future against a major if coal and natural gas were produced involvement of the public sector in in a neighboring country. investments required in regional projects. High tariffs and other barriers for imports imposed by governments, Also because of this combined with the monopoly'of state institutional set up, the involvement enterprise on· imports of coal, in interregional trade of a large - 7 number of different players with otherwise could have been developed different objectives creates complex by the private sector. For the same problems in achieving an agreement reasons, imports of natural gas were and causes considerable delays. For opposed by state enterprises, which example, the different players could at; the same time did not have the be the Ministry of Foreign Affairs, ffnancial resources to develop local Ministry of Industry and Commerce, gas reserves. Finally, there may also Ministry of Energy, Ministry of be a conflict situation if the state Finance, the State enterprises plus enterprise negotiates its budget in certain countries local private with the government and turns around sector engineering and civil works to negotiate costs of the private companies. Each player attempts to sector. In this case e~en if higher maX1m1ze or protect its perceived payments (still well below interests which could involve among international prices) to the private others: maximizing the industrial companies would be justified to added value in the country, solving 'increase reserves and production from balance of payments between the country's objectives point of countries, safeguarding political view, the state enterprises obj ective interests, avoiding losing monopoly is to limit its cost and consequently powers on imports or simply not payments to the companies. financially attractive for a state entity. Imports of natural gas to Pricing and Tariff Setting Brazil from Bolivia and from Argentina to Chile are examples of Governments in the region have economically attractive projects used petroleum products pricing and which have been entangled for several electricity tariff setting as a tool years by these type of problems. for generating fiscal resources, adjusting for "social inequity" Regulatory Role of the State through energy taxation and subsidies Enterprises but was generally perceived as a major parameter in fueling inflation. Conflict of interest between Consequently the pricing and tariff obje~tives of the state enterprises policy became highly politic~zed in which are to maximize benefits from most LA countries. This led oil resources (NOC) or electricity governments to take over tariff and (Electricity state entity) and the price setting and circumvent State which may be to achieve low commissions previously set up for cost energy for the economy under that purpose. macroeconomic constraints (for example expand natural gas reserves A recent study by OLADE (1990) rather than only oil or less costly shows that petroleum products prices thermal plants rather than increases are only responsible for a hydroelectricity) has constituted an very small increase in production obstacle, albeit little understood, cost and inflation. For example a in interregional trade. 100% increase in petroleum products prices is shown to be responsible for In certain countries, because only 4% on average of production the state energy enterprises had costs increases. monopoly powers but were financially constrained, they did not orient Pricing of energy in most their investments to small or less countries did not reflect economic economic energy resources which costs (Kosmo, 1989) leading to · 8 · subsidization of large sectors of the both at the wellhead and the economy and difficult financial consumers resulting in lack of situation for most public energy incentives to expand reserves and enterprises. These were not able to qj.stribution systems. The following carry out needed investments to shows the magnitude of energy increase production capacity and the s~bsidies relative to energy exports required infrastructure. Like all and total exports values (1985) in other energy sources natural gas some selected LA countries : prices, for example, were kept low %. of Energy. Export-a 68 2000 19 l5000 410 15 Non economic energy pr~c1ng and opportunity costs which raises issues tariff setting are maj or obstacles to of which of the Government, the state interregional trade: enterprise or the consumer should bear the cost. In the case of imports First, they limit expansion of of natural gas from Bolivia, Gas Del reserves or generation through Estado of Argentina had to bear the uneconomic wellhead (oil & gas) and difference in cost between imported generation (electricity) prices and and locally produced natural gas consequently opportuni ties of exports which was finally passed on to the of surplus energy; Government through non payment of certain taxes . In general this issue Second, vested interest group raises a conflict of interest between pressure builds up in the form of the state enterprise (prefers to local interest groups who have grown export and avoid imports) and the accustomed to subsidized prices state (political/social (power companies. industries, considerations); and residential consumers) and who would not favor exports in view of the Fourth, they unduly complicate dwindling of reserves, accelerated any negotiations for trade because of moreover by a lack of new discoveries misunderstandings on differences and an uncontrolled demand; between local subsidized prices and the negotiated prices which usually Third, there is a sharp conflict reflect the netback value of the between locally subsidized energy sold. prices/tariffs and exports/imports prices usually sold/purchased at · 9 . Economic Adjustment and Recent Policy by the state enterprises of major Changes in the Ener~ Sector infrastructure projects of the types carried out in the past (binational Recently several countries ~droelectric schemes and gas (Chile and to some extent Argentina, pipelines) will be very difficult to Jamaica and Ecuador) have adjusted j~stify in the future on some of their past policies in the macroeconomic grounds. While this may energy sector and are implementing appear as an obstacle to energy trade policy measures to provide autonomy at first, it may provide however an to the state enterpr-ises, reduce the opportunity for the countries state role in the energy sector, involved to encourage a more active implement pricing and tariff policies participation of their local private based on economic principles and sector in carrying out the required pI;:ovide an environment of open. infrastructure projects in competition through deregulation of association with foreign partners. pricing (petroleum) and elimination of barriers to entry in order to While adjustment policies would allow a strong involvement of the also appear· at first glance to private sector. inhibit energy trade because of scarcity of foreign currency to pay Chile has, for example, totally for imports of energy, this may not privatized its electricity sector be a big obstacle since in reality except for transmission and countries with a large economy distribution which remain regulated (Brazil) or an already growing as a common carrier and a natural economy (Chile) are potential monopoly, respectively. There is open purchasers of energy within the competition in generation and the framework of new projects and sale of electricity to large consequently energy trade in these consumers. Electricity tariffs cases would not constitute an reflect short run marginal co~ts and unsurmountable problem. As -a matter are determined through a priory of fact, imports of natural gas from agreed automatic formula and Argentina to Chile is being actively adjustment mechanism, thus minimizing pursued by a consortium of private political interference with tariff Chilean and Argentinian companies. setting. Subsidies are targeted directly to those consumers in need Financing of such interregional through treasury transfers and not projects appear also at first to pose tariff subsidies. Ex-refinery difficult problems. However petroleum products prices are at economically attractive interregional international parity import prices projects (oil/gas, coal and while imports and exports have been thermal/hydroelectric freed to allow competition in the development,transmission and supply, wholesale and retail transportation) which provide distribution of petroleum products. economies of scale, greater reliability in the provision of Most LA countries are undergoing energy, more rational uses of adjustment policies which require regional resources and fuels savings them, among other measures, to reduce should find a very receptive ear in public sector investments and debt, a multilateral and other official large part of which is in fact financial agencies. For example the attributable to the energy sector. ongoing Bolivia to Brazil gas As a result of this, implementation pipeline/power project, despite its - 10 complexity in terms of implementation implementing adjustment policies that arrangements and large financial would reduce the role and the size of requirements, has drawn the support the state in the economy, open the of several of ficial financing ~pnomy to investments and trade, put agencies. {~ place pricing and tariff policies based on economic principles and CONCLUSIONS encourage private sector investments. These policies would appear to 1. Even though the region as a promote less involvement than in the whole is energy self-sufficient and past of the state sector in large exports both petroleum and coal, only investments such as those required in about 62 % of its imports of oil interregional energy trade projects. products and 64% of its coal imports 4. Other than the technical and originate in the region. economic justification of energy Intrareg!onal trade in other energy trade projects, there have been major sources (natural gas and electricity) policy bottlenecks which have have been quite limited (3%) compared prevented a greater development in to the overall supply. This cannot be the LA energy trade: explained entirely by the lack of technical and economically justified . (i) in terms of energy policy energy trade projects in petroleum and strategy there was (a) a conflict products, natural gas, coal and between the energy import electricity. In fact even technically substitution policy followed by most and economically justified energy countries after 1973 and regional trade projects have suffered energy trade, (b) a lack of considerable delays in the past. consideration for natural gas and coal as equal alternatives to oil and 2. At the same time that the region hydroelectricity in energy planning is overly dependent on oil (58 %) locally and much less regionally, (c) compared to other developing regions a lack of consistency of energy of the world, natural gas and coal planning with macroeconomic policies which have large reserves to taking into account the uncertainty production ratios (75 and 504 years of oil prices and risk associated respectively) supply only 18% and 5% wi th large hydroelectric investments, of the total primary energy (d) high tariffs and other barriers requirements of the region. to imports of energy products and (e) Consequently there appears to be the perceived risk associated with significant room for future growth of energy dependency. natural gas and coal. There is also considerable room for expansion of (ii) in terms of the interregional trade i.n petroleum institutional set up, (a) the state, products and electricity. through its major role in energy and other entities responsible for 3. The 1980's was called the lost foreign policy, commerce, industry, decade for the LA countries in etc. .. made negotiations on energy general. The region has suffered from trade more complex by expanding them negative growth, high inflationary beyond their economic objectives and pressures and a large debt overhang. (b) the monopoly powers state In particular, a large part of the enterprises had on imports of energy public sector investments and debt was a maj or deterrent to possible had its origin in the energy sector. imports for many legitimate reasons Most countries in the region are now - 11 among which: state enterprises would 5. Most countries in the region are become only a middle man reaping only undergoing economic adjustment a fee and sometimes losses in the programs where the role and the process, imports were not financially w~ight of the state in the economy is as rewarding as, say oil development, be-ing reviewed, policies are being and imports meant less financial implemented for a more open economy resources from the state to develop that would encourage competition in a local resources. free market environment and where the private sector would have a major (iii) in terms of petroleum involvement. Chile and Mexico have products pricing and electricity already progressed in this direction tariff setting non economic energy to be followed soon by Argentina and pricing is a major obstacle to others. In this context, economic interregional trade by (a) limiting policies would drive and orient expansion of reserves or generation energy policies, the role of the and consequently opportunities o'f state as a policy maker would be exports of surplus energy, (b) strengthened while its regulatory creating a lobby of local interest role would be assumed by independent groups grown accustomed to subsidized agencies, and state enterprises would prices (power companies, industries, finally be able to compete with residential consumers) opposed to private entities without undue exports in view of the dwindling of interference by the government. Under reserves accelerated by both a lack these conditions, interregional trade of new discoveries and an and cooperation should thrive because uncontrolled demand, (c) creating a several bottlenecks mentioned above sharp conflict between locally would be reduced or disappear subsidized prices/tariffs and altogether in time. Economically exports/imports economic prices which attractive investments in raises issues which of the interregional projects would find Government, the state enterprise or considerable support for financing by the consumer should bear the private sector, multilateral and difference in cost, (d) raising a official credit agencies. conflict of interest between the state enterprise (prefers to export CKlmfeleoplae but avoids imports) and the state (political/social considerations) and (e) unduly complicating negotiations for trade because of the contrast with higher ~xport/import prices. - 12 TABLE 1. Major Latin AmericaD: Economic Statistics (1988) - Country Population GNP GNP/Capita GDP Rate of Total External (Million) US$ US$ Growth of Inflation Debt (Billion) % (80-88) % US$ % (80-88) Billion Exports ------- ----_ ... ---- ------ ------_ .. _ ... ------ ---_ ... _------ _ .... _---------- ... Low Income Economies Haiti* 6 2.3 380 -0.2 7.9 0.7 8.8 Middle Income Economies - Bo1ivia* 7 4.0 570 -1. 6 482.8 4.7 32.9 Brazil * 144 311.0 2160 2.9 188.7 101.4 42.0 Chile * 13 19.6 1510 1.9 20.8 16.1 19.1 Colombia 32 37.8 1180 3.4 24.1 15.4 42.3 Costa Rica* 3 5.1 1690 2.4 26.9 3.8 19.9 Dom. Rep.* 7 5.0 720 2.2 16.8 3.3 14.4 E1 Sa1vad.* 5 4.7 940 -0.-0 16.8 1.7 18.8 Ecuador 10 11. 2 1120 2.0 31. 2 9.4 21.4 Guatema1a* 9 8.1 900 -0.2 13.3 2.2 27.2 Honduras * 5 4.3 860 1.7 4.7 2.8 28.6 Jamaica * 2 2.1 1070 0.6 · 18.7 3.6 24.8 Mexico 84 147.8 1760 0.5 73.8 88.7 43.5 Nicaragua * 4 n.a. n.a. -0.3 86.6 6.7 n.a. Panama * 2 4.2 2120 2.6 3.3 3.6 0.2 Paraguay * 4 4.7 1180 1.7 22.1 2.1 24.6 Peru 21 27.3 1300 1.1 119.1 13.9 8.7 Upper Middle Income Economies Argentina 32 80.6 2520 -0.2 290.5 49.5 36.0 Trinidad & T 1 3.3 3350 -6.1 5.3 1.7 9.2 Uruguay * 3 7.4 2470 -0.4 57.0 3.0 30.3 Venezuela 19 61. 8 3250 0.9 13.0 30.3 39.7 Total 413 752.3 1840 364.6 * Oil Importers. The rest have a balanced oil supply or are exporters Source : ~or1d Bank Development Report (1990) - 13 TABLE 2. Latin American Region Primary Energy Requirements (1987) - Million Tons of Oil Equivalent(MTOE) Coal Oil Gas Nuclear Hyd./Other Elect. Total Indigenous Prod. 17555 356973 70485 1645 73735 520393 Imports 9260 88110 2163 1518 101051 Exports -6766-200575 -1731 -186 -209258 IntI. Marin. Bunk. -7940 7940 Stock Change (+/- ) 178 -2462 - 190 2474 Total 20227 234106 70728 1645 73735 1332 401772 Percent 5 58 18 0.4 18.3 0.3 100 Source lEA, 1989 - 14 TABLE 3. Latin America Region Commercial Energy Indicators (1988) Country Energy Consumption Energy Consumption Energy Imports Per Capita Per Unit GDP as a Percentage (Kg of Oil Equivalent) (Kg of OEjUS$) of Merchandise Export Low Income Economies Haiti* 57 0.15 13 Middle Income Economies Bolivia* 249 0.44 3 Brazil * 1627 0.75 13 Chile * 832 0.55 4 Colombia 755 0.64 4 Costa Rica* 557 0.33 12 Dom. Rep.* 332 0.46 36 El Salvad.* 215 0.23 14 Ecuador 573 0.51 3 Guatemala* 168 0.19 14 Honduras * 203 0.24 .r 14 Jamaica * 855 0.80 22 Mexico 1305 0.74 1 Nicaragua * 252 °n.a. 42 Panama * 1627 0.77 57 Paraguay * 224 0.19 12 Peru 478 0.37 .1 Upper Middle Income Economies Argentina 1523 0.60 4 Trinidad eSc T 5255 1.57 10 Uruguay * 769 0.31 10 Venezuela 2354 0.72 o Total * Oil Importers. The rest have a balanced oil supply or are exporters Source : World Bank Development Report (1990) - 15 TABLE 4. Natural Gas Reserves and Supply in the LA Region Country Supply Reserves Reserves/Supply (BCM)* (BCM) Ratio in Years 1987 2000 Annua1**- 1987 2000 1987 2000 Additions Argentina (1) 20.7 31. 2 15.2 682 542 33 17 Bolivia(2) 2.4 3.5 2.9 144 143 41 41 Bolivia(3) 2.4 5.9 2.9 144 128 41 22 Brazil 3.2 11. 7 10.8 106 107 33 9(4) Chile 0.2 0.5 1.4 142 156 710 312(7) Colombia 3.4 10.7 3.0 109 56 32 5(4) Mexico 27.4 73.4 88.0 2166 2655 79 36 Peru 0.7 1.3 15.4 24 211 34(5) 162(6) Trin. & Tob. 4.9 11.5 5.9 297 267 61 23 Venezuela 21. 8 61.1 217.4 2646 4933 121 81 Total 84.7 215.6 360.0 6316 9266 75 43 * Billion Cubic Meters of Natural Gas ** Annual Historical Incremental Reserves of Natural Gas 1. Asssumes imports from Bolivia beyond 1992 but excludes possible exports to either Brazil or Chile. 2. Includes present exports to Argentina but not to Brazil 3. Assumes equal volumes of exports to Argentina and Brazil 4. This level of reserves is not considered adequate by industry standards 5. Excludes newly discovered reserves of Camisea field . 6. Includes Camisea field reserves 7. Methanol exports included Source: Khelil, 1990 - 16 TABLE 5. Natural Gas Demand by the Year 2000 and Potential Market (MTOE}~ ~ Country M A R K E T S Residential Industrial Power Total Pot.* Demand** % Pot. Dem. % Pot. Dem. % Pot. Dem. % --- ---- ------ ----- 8.5 60 6. 8 ~ 24 26.4 43 Argentina 11. 3 Bolivia 0.6 0.05 5 8.3 0.8 7.8 0.8 72 85 6.8 1.0 - 0.1 12 2.4 -23.1 0.9 34 Brazil 19.5 0.4 1 46.0 6.7 9 15.1 80.6 7.1 6 Chile 0.9 0.3 19 1.9 0.1 3 0.6 3.4 0.4 8 Colombia 2.4 0.3 5 5.5 2.8 40 4.9 4.9 22 12.8 8.0 23 Mexico 27.4 2.4 7 77 .8 42.7 49 60.4 4.6 6 165.6 49.7 25 Peru 1.8 0.05 2 2.4 0.7 21 1.4 0.3 5 5.6 1.0 9 Trin.& Tob. 6.2 6.2 93 1.8 1.8 98 8.0 8.0 94 Venezuela 4.7 0.5 6 25.6 25.6 80 18.2 5.6 11 48.5 32.1 35 Total 68.6' 12.5 11 174.5 93.8 42 110.2 24.1 7 353.3 130.4 19 * Market in MTOE which could potentially be satisfied with natural gas. ** Estimated demand for natural gas in MTOE and as a percentage of the total sector ( residential, industrial, power) energy market. Source Khe1i1, 1990 · 17 . REFERENCES OLAnE, 1988. The Foreign Debt of the ~ergy Sector: Evaluation, Outlook and Options. Prepared for the XIX Meeting o~Ministers. Mexico City. 'World Bank. Brazil Energy Strategy and Issues Study Pricing and Investment Policy. Internal Report. May 9, 1990. lEA Statististics. World Energy Statistics and Balances, 1971-1987. Organization for Economic Cooperation and Development. Paris. Khelil, C.. Natural Gas in Latin America : Market Structure and Future Outlook. ARPEL Meeting, La Paz, Bolivia, May 23, 1990. Huntington, H.G. and Schuler, G.E. North American Natural Gas Markets : Summary of an Energy Modeling Forum Study. The Energy Journal. Vol. II, No.2, July 1990 OLAnE. Estudio de las Politicas de Precios del Petroleo y Derivados para America Latina y El Caribe. Informe Preliminar. Noviembre 1990. Kosmo,M. Commercial Energy Subsidies in Developing Countries Opportunity for Reform. Energy Policy, June 1989 - 18 ENDNOTES 1. San Jose and Caricom accords provides financing facilities by oil exporters (Mexico, Venezuela, Trinidad) to several Central American and Caribbean countries. 2. Sa1to Grande (1890MW) between Uruguay and Argentina. Itaipu' (12600MW) between Brazil and Paraguay. Yacyreta (under construction - 3000MW) between Argentina and Paraguay. 3. Natural gas trade is estimated at 3% of the region's generation. 4. Electricity trade is estimated at about 3% of the region's generation. 5. This ratio (World Bank, 1990) averaged 1.7 for the LA region compared ~o a low of 0.03 (USA) and high of 0.45 (Japan) during the period 1980-1987.