With the growing energy demand in Asia, crude oil from Latin America is moving eastward into China and India.
Energy security which has become a crucial determinant of international relations has two facets: short-term goals that focus on the ability to react promptly to sudden changes within the supply-demand equilibrium and long-term aims relating to investments ensuring prolonged supply in tune with sustainable development. In the energy demand-supply equilibrium scarcity of resources, high and volatile prices, optimization of the use and diversifying the sources, assured and affordable supply and minimal environmental impacts are the main considerations.
The Latin American and Caribbean (LAC) countries have witnessed growing energy demands which is largely in commensurate with industrialisation, urbanisation and population growth and thus have been compelled to identify alternative energy sources. Resource nationalism, the effort by resource-rich nations to bring economic and political control of energy and mining sectors under state ownership, is explained by the creation of institutions like PdVSA in Venezuela, Pemex in Mexico and Petrobras in Brazil.
For the LAC, natural gas is the long-term, cost-effective and environmentally sustainable source for electricity generation in the face of untenable oil-powered or hydropower plants. It is an energy-efficient investment since the installation and environmental costs of natural gas facilities are lower than fossil fuel-based plants. The international and domestic actors have been instrumental in pushing the governments to include environmental dimensions in the energy security approach even while critics argue that environmental and climate change concerns have never been at the core of the LAC government’s policy agenda. To dispel the criticisms, Brazil’s proactive credentials on climate change within world fora like UNFCCC and its emphasis on biofuel technology could be cited.
Growing acceptance that climate change required the reduction of carbon emissions, has made renewable energies a priority. A quarter of the LAC’s primary energy is generated from renewables which is double the global average. Besides, the region has significant wind and solar potential that can help to reduce reliance on large hydro and biofuels during extreme weather events. Brazil, Chile and Mexico ranked amongst the top ten global renewable energy markets in terms of investment in 2015 (IRENA Renewable Energy Market Analysis 2016). The International Renewable Energy Agency (IRENA) has recognised Latin America’s potential as a prototype for demonstrating the enhanced use of renewables for power generation, transport and other end-uses. During the UNFCCC CoP 25 in Madrid (2019), a regional initiative coordinated by the Latin American Energy Organization (OLADE), set a target of seventy% share for renewable energy in the total electricity generation by 2030.
A significant prescription towards attaining energy security would be reliance on a suitable “energy mix”, which recommends dependence on two or more varieties of fuels such that a variation in the availability of anyone will not lead to energy insecurity. In terms of “energy mix”, the LAC region stands out as one with the cleanest electricity matrix, specifically, Brazil is a classic case with a 45% share for renewables.
In terms of production, aggregate figures mask the heterogeneity among countries of the LAC region since most figures depict the performance of Mexico, Brazil, Venezuela, Colombia and Ecuador, which account for nearly 80% of the regional oil production. Despite the regional disparities in the availability of energy resources, equity can be attained through collaboration among the countries of the region which has witnessed a myriad of regionalism, energy being an important point of collaboration. Regional energy integration, predominantly in Central America, has provided economies of scale to lower the cost of energy generation, reasonable pricing and steady supply.
In the world arena, with the growing energy demand in Asia, crude oil from Latin America is moving eastward into China and India. LAC with its surplus crude and opportunities for investment fits in perfectly within India’s energy security strategy. Crude petroleum oil traded between India and Latin America has become central to India’s energy security, accounting for nearly one-fifth of India’s oil imports by quantity since 2012. With the US reducing its imports from LAC due to increased domestic production and increased reliance on imports from Canada, the Latin American crude exporters can make forays into India which seems inclined towards diversifying its resource base and reducing dependence on the Middle East.
Latin America can be counted as a reliable long-term source of imports in the coming years because hopefully, Venezuela will be able to raise exports once the political situation stabilises and Brazil would manage a quantum jump in exports after the plugging in of the Petrobras scandal. The issues of distance and high cost of freight have been resolved by utilising the very large crude carriers that would normally return empty after dropping off crude oil from West Asia to the US, to bring back crude oil from LAC.
To summarise, the niche position for Latin America in the energy security scheme has been reinforced through the targets set in the 2030 UN Development Agenda for Sustainable Development—universal access to energy, increased share of renewable energy in the global energy mix and improvement in energy efficiency. Reduction in import dependence to preclude fluctuating prices of energy resources, adoption of energy efficiency measures, emphasis on resource nationalism, treading on low carbon-emission pathways and sensitisation of citizens can accelerate the attainment of energy security in LAC and India.
Aprajita Kashyap is a faculty at the Latin American Division of School of International Studies, JNU, New Delhi.