PPT LourdesMelgar

8/2/2019 PPT LourdesMelgar

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ENERGY SECURITY:A NORTH AMERICAN APPROACH

by Dr. Lourdes Melgar

Forging North American Energy SecurityConference, Monterrey, Mxico

April 1-2, 2004


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ENERGY SECURITY: A NORTH AMERICAN APPROACH

I. Introduction

II. Energy Security: Evolution of the Concept andCurrent Understanding

III. Furthering Energy Integration as a means toEnsure Energy Security

IV. Rendering North American Energy Markets

more DynamicV. Imagining the Future: North American Energy

Security as a Reality


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ENERGY SECURITY: A NORTH AMERICAN APPROACHIntroduction

Energy has become a key issue in NAFTA. Ensuring the availability ofadequate, reliable and

affordable supply of energy is key to 3 countries.

Energy security is to- U.S.: a priority of its trade and foreign policy.- Canada: a matter intimately related to

environmental protection.- Mexico: a sovereignty issue.

After 9/11, broader concept, encompassing theintegrity of critical infrastructure.

Is it possible to consider energy security from a NorthAmerican perspective?


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ENERGY SECURITY: A NORTH AMERICAN APPROACHEnergy Security: Evolution of the Concept and Current Understanding

Energy security: essential to sustained development of nations.

household concept 1970s oil shocks, AIE 74

reliable availability of oil supply at affordable prices. 1990sdefined in terms of:

external factors (geopolitics);

internal factors (operational and investment);

temporal factors (short-term; long-term).

Multidimensional policyapproach: energy efficiencyconservation; fuel diversification; adequate margins of

reserves. Precondition: protection of environment,climate change mitigation.


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ENERGY SECURITY: A NORTH AMERICAN APPROACHEnergy Security: Evolution of the Concept and Current Understanding

U.S.at the forefront of definition of energy security. 2001 National Energy Policy proposes a North American

Energy Framework as key element in ensuring energysecurity:

Support a North American Energy Framework to expand and accelerate cross-border energy investment, oil and gas pipelines, and electricity grid connectionsby streamlining and expediting permitting procedures with Mexico and Canada.

NAFTA partners should be NAFTA energy partners.

Mexicos Challenge: investment. Solution: opening upenergy sector to foreign investment and fostering energymarkets within the region. But Sovereignty issue.

Canadian participation: precondition for success. Accenton sustainable development, fulfilling Kyoto Agreement.

March 2001, North American Energy Working Group.


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ENERGY SECURITY: A NORTH AMERICAN APPROACHFurthering Energy Integration as a means to achieve Energy Security

Energy map: point of departure in design of viable policies to

achieve energy security from a North American perspective.

Source: North America-The Energy Picture

North America: most energy intensive region in the world,

but not self-sufficient, relies on foreign trade to supplementits needs.


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Canada and Mexico are net exporter of energy with 5 and

3 quads respectively.The U.S. produces 72 of the 99 quads it consumes. Importshave doubles over the past decade and are growing.

Source: North America- The Energy Picture

U.S.: main importer of

energy from Canada andMexico, 36% of itsneeds.

Canada provides 15%

natural gas, 15% oil, 1%electricity.

Mexico provides about15% oil, imports refinedpetroleum products and

trades electricity.


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North America energy challenges: oil and gas supply.

Oil dominant fuel in energy mix until 2030. US: #3 world producer, 7.9mmb/d, imports over 50%

needs. Most mature oil producing region in the world. Canada: 3.1mmb/d of crude and oil sands, exports 1.9

mmb/d. Oil sands production offsetting decline in crude,but more costly.

Mexico: 4th producer 3.8mmb/d, exports 1.8 mmb/d,mostly to US. Probably the most closed country world-

wide in terms of foreign participation in oil sector. U.S. oil market offers goods prospects for Canada and

Mexico: geographical advantage, political closeness, andappropriate refineries.

Increasing oil trading: win-win situation, favors securityof oil supply in NA.


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Natural gas supply: critical to NA energy security. NAFTAapproach most likely to produce most beneficial response.

Natural gas preferred fuel90s: wide availability, costcompetitiveness, environmental friendliness.

1999 patterns of consumption surpassed production rates.2000 prices skyrocketed new equilibrium US$ 4.5mcf.

NA largely self-sufficient, highly integrated with vastlyinterconnected grid. But, U.S. and Mexico import15% of

respective needs and demand in 3 countries growing.Ambitious projects to increase domestic production: MacKenzie gas project, Alaska, Burgos. But not sufficient.

Imports needed to maintain adequate balance: LNG option,supply flexibility =security of supply + lower prices.


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DC

E

B

A

Existing terminals with expansionsA. Everett, MA: 0.715 Bcfd

(Tractebel)B. Cove Point, MD: 1.0 Bcfd

(Dominion)C. Elba Island, GA: 1.2 Bcfd

(El Paso)D. Lake Charles, LA: 1.3 Bcfd

(CMS Energy)E. Guayanilla Bay, P.R.: 0.093 Bcfd

(Eco Electrica)

Proposed LNG terminals

Existing and proposed LNG Terminals

Source: LNG Ministerial Summit Presentation, 2003, SENER


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ENERGY SECURITY: A NORTH AMERICAN APPROACHRendering North American Energy Markets more dynamicDebates about benefits of NA energy integration surpassed byreality. Dense natural gas grid reflects the intensity of the flows.

MainCanadianNatural GasPipelines

Source: NorthAmerica- TheEnergy Picture


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ENERGY SECURITY: A NORTH AMERICAN APPROACHRendering North American Energy Markets more dynamicNatural Gas Pipeline Interconnection between Mexico and the United States

Source: North America- The Energy Picture

Structure of market facilitates a NAFTA response to natural

gas challenge.

Cross-border trade: better allocation of resources

Furthering NA natural gas market =useful instrument to

enhance energy security

Modern and transparentregulatory frameworks in 3countries allow competitiveparticipation of privatesector in upstream naturalgas business.


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ENERGY SECURITY: A NORTH AMERICAN APPROACHRendering North American Energy Markets more dynamic

Secure power supply: essential, limits to substitution ST: Guaranteeing system reliability;

LT: secure adequacy ofgeneration and transmission.

Adequate and timely investment: prerequisite to ensurea secure power supply.

Paradigm shift: from regulation to competition

NA reflects diversity of debate, but same challenge:meeting growing electricity demand.

Electricity market remains local market.

NA: major power grid but not a comprehensive one.


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Canada. Major international interconnections and electricity trade

Source: North America-The Energy Picture


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Mexico-US power border interconnections

Source: North AmericaThe Energy Picture


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California Crisis showed limits of cross-border trade:-infrastructure-Presidential permits

Several projects under consideration gas and electricity

Business opportunities will arise from more expedientapproval processes.

Intensifying NAFTA electricity trade requires solvinginterconnectivity capability and compatibility issues.

Trilateral integration: key to security of power supply.

Important gains from growing trilateral trade: Fuller coverage Greater reliability

Increased reserve margin


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ENERGY SECURITY: A NORTH AMERICAN APPROACHImagining the Future: North American Energy Security as a Reality

Development of NA energy markets will accelerateprocess ofintegration.

Core issues in 3 countries will not change.

Challenge: harmonizing rules and regulations to attract

investment for infrastructure to sustain trade. Lack of capital investment could bring flexibility. Multi-dimensional approach to energy security:

-Energy efficiency and conservation: Star Program

-Reviving nuclear option, NAFTA waste disposal facility.-Use ofcoal with clean-coal technologies.

Energy security: strategic factor in economic

development and stability of North America.

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