Abstract

The U.S. Department of Energy and the energy ministries of the western hemisphere are working to create a strategy to eliminate the barriers (regulatory, fiscal, cultural, and technical) to increased private sector investment in the energy sector, particularly the natural gas sector. Their efforts recognize the environmental benefits of natural gas, its abundance in Latin America, the high risk and cost of cross-border infrastructure development, and the increased competition for investment capital faced by the energy sector.

This paper describes this effort and provides its history, context and current status, explores the issues, lists the players, articulates the vision, and outlines a strategy. The Western Hemispheric Natural Gas Strategy has four goals and these are described in the paper:

  1. to attract private capital for gas infrastructure projects

  2. to enable development of energy markets where gas can compete on an equal basis with other fuels

  3. to facilitate efficient use of natural gas throughout the Hemisphere

  4. to promote regional gas projects and regional energy trade.

This information should interest private sector operators and investors currently active in Latin America and those considering future investments; members of the private sector wishing to participate in the dialogue and the process; and consumers of oil & gas. Latin American markets are becoming increasingly attractive to private sector investors as individual countries make constitutional changes that permit privatization and/or commercialization of indigenous oil & gas resources, yet risk remains high.

This effort by the energy ministries of the western hemisphere represents a unique partnership between nations, between the public and private sectors, between producers and consumers of energy, especially natural gas, and between the energy sector and investors. This effort toward greater transparency and stability of the regulatory, fiscal, and cultural regimes currently in place within the western hemisphere will reduce risk and increase returns on investments.

Introduction

Recent focus by the governments of the western hemisphere on environmental and other issues has highlighted the interdependence of energy production and environmental protection. Protection of the environment is, of course necessary and important, and energy production is also necessary and important. Hence world leaders face the struggle of balancing the need to protect a vulnerable ecosystem with the need for energy to heat homes, power industries and businesses, run cars, and generally fuel the economy.

The United States is particularly dependent on energy. especially fossil fuels: coal, oil and natural gas. And US citizens are especially vigilant in environmental protection. So, US leaders must be especially sensitive to the need to balance environmental protection with the energy dependence of the nation. For the US, however, the issue is complicated by the fact that it cannot produce all the energy it consumes. This situation forces the US to import the deficit. Currently, 7.5 MM BOPD are imported as are 7 BCF of natural gas. This dependence especially on foreign oil causes the US to be concerned about the stability of that foreign source of supply.

One way to address this concern is to diversify both the source of supply, and the type of energy used. Partnership with the countries of the western hemisphere is one strategy for diversifying the sources of supply. Increasing the use of natural gas is one strategy for diversifying the type of energy that is used.

One mechanism for hemispheric cooperation is the Summit of the Americas process. This process represents an important opportunity for balancing environmental protection with energy production, and is the subject of this paper. The 1994 Summit of the Americas focused on many issues affecting the western hemisphere, but the issues of interest for this paper are the action items developed under the principle of sustainable energy use that promote economic growth while protecting the environment.

This paper explores the Summit of the Americas process, and because it is a process, reports on progress towards its goals as of June 1997. The paper begins with an overview of the global energy situation, with particular emphasis on the energy situation of the western hemisphere. P. 151^

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