Evaluation of Gas Monetization Options in Latin America

Jul 6, 2016

Latin America([1]) is richly endowed with natural gas resources, and has the potential to considerably increase its global importance as both a gas consuming and producing province.  The region’s positive economic growth outlook and the consequent need for increased energy supply augur well for increased gas use.  Although the power and industrial sectors are expected to underpin regional gas demand growth, investor confidence in the energy regimes of some Latin American countries is not strong.  If this lack of confidence prevails, the prospects for new domestic gas utilization projects will be affected.  The outlook for gas demand in the region is therefore subject to a strong degree of uncertainty.

Latin America’s natural gas demand growth is predicated on access to abundant quantities of economically-priced supplies, but the region has hitherto struggled to find its footing as a natural gas producing province.  First and foremost, Latin America’s natural gas resource distribution is far from uniform.  Not all Latin American countries have the wherewithal to produce gas or even import it from neighboring producers owing to geographical and/or geopolitical realities.  To date, this limited access to supply has constrained gas’ share of the primary energy mix in parts of the region.  Unfortunately, history has shown that even a strong reserves base is no guarantee of supply sufficiency at a national level, let alone a regional level.  Looking ahead, the failure of Latin America’s ambitious indigenous production plans to materialize as planned may result in one of three outcomes: a greater-than-expected reliance on imported gas, a longer-than-expected reliance on imported gas, or a combination of the two.  This in turn could affect investment plans in the region’s power generation and industrial sectors, and the price of gas for commercial and residential end-users.

Nexant plans to undertake a new multi-client study that profiles and assesses Latin America’s historic and future natural gas market.  This report will provide information on 14 selected natural gas monetization options in Latin America during the 2005-2035 period: ammonia and derivatives, methanol and derivatives, energy and fuel applications, and liquefied natural gas (LNG).  These monetization options are illustrated in Figure 1.  This multi-client report will provide a valuable aid for strategic planning purposes during a time of both opportunity and challenge for natural gas exploitation.  Key uncertainties that will be addressed include:

  • What is the outlook for regional natural gas production, especially in light of Argentina’s ongoing credit issues, Venezuela’s ongoing economic crisis, the difficulties currently plaguing Brazil's state-controlled petroleum giant Petrobras, and Mexico’s recently-announced energy sector reforms?
  • What are the characteristic drivers of Latin American gas consumption, and what is the expected trajectory of regional natural gas demand growth? 
  • What institutional and infrastructural impediments exist to the expansion of gas’ role in the region?
  • What will be the future availability and cost of natural gas feedstock? 
  • What is the market outlook for the major derivatives of natural gas?
  • How will technology and capital cost developments impact these industries?
  • How competitive will these products produced in Latin America be with those from other regions?

Figure 1 –Latin American Gas Monetization Options

The study has a target completion date of end of the fourth quarter of 2016.  A detailed prospectus and order form can be accessed on the NexantThinkingTM website under the “Coming Soon” tab at http://thinking.nexant.com/program/special-reports .  More information is also available from study authors Marisabel Dolan (mdolan@nexant.com) and Nelly Mikhaiel (nmikhaiel@nexant.com).

[1] For the purpose of this report, Nexant’s definition of the region encompasses Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Central America and the Caribbean, Mexico, Paraguay, Peru, Uruguay, and Venezuela.