How Latin America and the Caribbean Can Benefit from the US Shale Boom
September 14, 2015
The United States is producing more shale natural gas than ever and this excess supply has driven global prices down. It has gone from importing gas from Canada or Trinidad & Tobago, to being a net exporter.
One region that can greatly benefit from plenty and affordable gas supplies is Latin America and the Caribbean. Many countries in the region face shortages of natural gas while gas demand is rising due to increased electricity consumption.
On the downside, the demand for natural gas also depends on high international oil prices which have been declining since mid-2014. This raises questions about the volumes of U.S. LNG (liquid natural gas) the global market can absorb.
Still, Latin American and Caribbean countries are well-positioned to capitalize on the surplus of U.S. gas exports.
- Importing cheap natural gas can lead to lower electricity costs, boosting economic growth.
- For the countries that provide residential electricity subsidies, lower costs would reduce the burden on government budgets.
- In the industrial sector cheaper electricity and natural gas could bring about an industrial and manufacturing boom.
- Gas imports could also encourage cleaner energy generation.
Many countries in the region are net importers because lack of investment has prevented the development of domestic reserves. Mexico, Brazil, Argentina and Chile are the largest importers, while Trinidad & Tobago and Peru are important net exporters.
Latin America can make its transition to natural gas and exploit the benefits of gas exports by expanding its energy integration. U.S. natural gas would flow to Mexico through pipelines; it would reach the Southern cone and the Caribbean countries in the form of LNG.
Source: Lisa Viscidi, Carlos Sucre and Sean Karst, "How Latin America and the Caribbean Can Benefit from the US Shale Boom
" The Dialogue, September 2015.
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