ISSUES....
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The new panacea?

LNG in Latin America: The New Panacea? : Liquefied natural gas (LNG) is increasingly at the heart of energy policymaking in Latin America, driven by regional supply and demand imbalances, energy security concerns, and a perception that LNG could be a more flexible source of natural gas supply. The introduction of LNG will have several implications for the region’s gas markets and broader energy sectors:

Increasing LNG imports and exports will help to introduce a reference to global gas prices in what were previously isolated local gas markets. This will put upward price pressure on markets where gas prices have been kept artificially low. In turn this will push up regional power prices and may challenge natural gas’s status as a preferred fuel for power generation, industrial processes, and transportation in many countries.

LNG will have an impact on energy security in importing countries, but may bring mixed results. Although in most countries LNG will contribute to diversification of supply, it may also introduce a level of price volatility previously unseen in the region. The premium placed on energy security by the region’s governments may wane as the parallel costs of higher gas prices and greater volatility begin to be felt.

Growing LNG trade will affect the development of regional pipelines. Here too the effect is not necessarily unidirectional: although LNG may supersede some pipeline projects, it may also encourage other pipeline connections, for example to expand gas penetration to areas of a country not previously supplied and to reexport LNG to neighboring countries.

From Cera's Latin American Energy / Sept. 12, 2007 / Insights@CERA.com


Petroleumworld 10 16 07

 

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