Pacific Alliance Energy Forum

Date: 28 – 29 Sep 2017
Location: Cartagena, Colombia

The Growing Economies: Pacific Alliance Energy Forum gathers the country members of the Pacific Alliance - Colombia, Mexico, Peru and Chile – to further the group’s evolving energy agenda and explore the new energy market opportunities arising from increasing regional engagement. The meeting brings together energy regulators and public sector leaders in charge of this agenda along with investors and financiers looking to strengthen their presence in the emerging Pacific Alliance energy market.

The Pacific Alliance Energy Forum will for the first time open this block to investors in a decision makers gathering to identify and highlight the opportunities and trends for the energy business within this block.

The Pacific Alliance country members have been implementing business-friendly policies for investors in the last decade, with Colombia, Mexico, Peru and Chile now in the top-third of the World Bank’s ‘ease of doing business’ ranking.

With a market of around 217 million people with an average GDP per capita of US$ 16 759 and 49 observer states, including global leaders such as Japan, China, Germany, France, the United Kingdom and the United States, the Pacific Alliance emerges as an attractive regional trade block of high growth economies with global appeal.

Opportunities in The Pacific Alliance

Colombia

Since 2008, Colombia has dramatically increased hydrocarbon production, after a set of successful regulatory reforms that buoyed exploration and production.

The 2013-2027 electricity strategy of UPME is designed to boost the power sector capacity and encourage investments in the energy sector in order to satisfy the growing electricity demand. According to the government, Colombia's overall power generation during the period will increase by an annual average of 3.4% to 76.0 TWh with an average annual growth of 3.6% in hydroelectric power generation, while coal and gas-fired generation are forecast to increase by an annual average of 2.9% and 2.7%, respectively.

Hydroelectric power accounts for 75% of the total consumption in Colombia, despite the problems associated with this source of energy such as protests at construction sites and a risk of guerrilla attacks. In a bid to diversify and attract foreign investments, the government has decided to sell a 57.6% stake in the nation's third-biggest electricity generator Isagen. The government is seeking USD 2.5 billion for its stake and plans to invest the proceeds from the sale into electricity infrastructure. Isagen owns and operates six electricity generators in the provinces of Antioquia, Santander, Caldas and Tolima.

Colombia’s Energy Ministry has set up an energy efficiency agency, which is responsible for auditing and potentially reducing local electricity prices. The country is preparing a regulatory framework and legislative instruments to promote the sustainable production of biofuels. Today, biofuel producers in the country have access to a special regime which allows them to conduct duty-free import of machinery for production and transportation. Colombia's current production capacity is 1.1 million litres/day of ethanol and 1.8 million litres/day of biodiesel. Production is expected to grow by 2% annually in the coming years.

Colombia's government is seeking to raise USD 2.5 billion from the sale of its 57.6% stake in Isagen, which operates six electricity generators. In March, local judicial authorities have ordered the suspension of the sale due to constitutional concerns.

According to the international energy outlook, the global power sector is expected to rise by 41% from 2012 to 2035, compared to 30% registered during the last decade. Around 95% of the growth in demand is expected to come from emerging economies, while energy use in developed countries (North America, Europe and Asia) is expected to grow by a small percentage.

Mexico

Announced in August 2013, the Mexican energy reforms are historic because they open the energy sector to private investment for the first time in over 75 years. Mexico is an outlier in Latin America. Ranked in the top ten in the world.1

Mexico’s landmark Energy Reform is now a reality, creating significant investment opportunities throughout the entire value chain.

Committed Investment so far is 70 billion dollars (+30 billion in 2017) and estimated total investment is 242 billion dollars.

A total of 82 companies from 18 countries have won contracts for the development of hydrocarbons and electricity projects.

The Energy Regulatory Commission (CRE) has effectively become the regulator of the mid and downstream segments of the oil and gas value chain, as well as the entire electricity supply chain.

90% of the 2P Reserves and 95% of the Prospective Resources in Mexico, are still available for bidding.

Mexico’s Gas Pipeline Network will expand considerably from 2012 to 2019. Total expected investment by Canada and USA is 16 billion dollars.

New transportation infrastructure by 2019, according to the Five Year Gas Pipeline Plan includes; 10 new strategic gas pipelines, 2 social coverage gas pipelines, 7 interconnection points with the US, and 1 interconnection with Central America.

Peru

Peru has the eighth largest oil reserves in Latin America, with 633 million barrels of proven reserves, most of which are onshore in the Amazon region. Peru also has more than 15 trillion cubic feet of natural gas reserves, the third largest reserves after Venezuela and Mexico in Latin America.

Peru offers a positive and friendly legal framework to encourage foreign investment such as; legal stability agreement, early VAT recovery, property rights and judicial guarantees, access to national and international capital and credit, open competition, access to international mechanisms to solve disputes and no barriers to foreign investment.

The main renewable energy resource in Peru is hydropower. The country has 69,445 MW Hydropower potential, 22,450 MW Wind potential, 3,000 MW Geothermal potential, 814 MW Biomass and Biogas potential and 4.5 – 6.5 kWh/m2 Solar potential.

By the end of this administration, Peru will reach 99.1% of electricity coverage. There is a projected investment of USD 1.4 billion in rural electrification projects which includes financing of projects for the distribution companies. This is projected to benefit 2.9 million people and starting in 2018, will include a massive Solar PV Program.

Peru is primed for the natural gas industry. The volume of natural gas consumed in Peru has risen by 713% in the last 10 years.

Chile

Chile is a major consumer of energy – the fifth largest in South America.

Chile has an enormous potential of over 1,865,000 MW of Wind, Solar and Hydroelectric power. In addition over 2,000 MW geothermal is likely to emerge.

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