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Oil and gas sector prepares for energy transition in Latin America and the Caribbean

With the recent sanctions imposed on Russia, the world is going through a transition that demands new ways of guaranteeing energy supply for global demand. This is why there is now talk of providing more cost-effective energies to compete with hydrocarbons, and although this is not going in leaps and bounds, the direction and goal are imminent. This is because humanity has set the goal of counteracting climate change by 2050, thus affecting dependence on fossil fuels. In that sense, in this article we will help you understand the energy transition in Latin America, and how Venezuela can be integrated into this transition.

Current context of the energy transition in Latin America and the Caribbean

In Latin America, efforts to counteract the impact of CO2 vary widely. There are countries whose environmental policies, or lack thereof, are more exposed to climate change than others. In addition, the modernization of infrastructures aimed at meeting energy demand is a slow process and each country advances at its own pace according to its own reality. However, countries such as Uruguay, Costa Rica, Colombia, Brazil and Chile are already leading the way in the energy transition in the region.

The executive secretary of the Latin American Energy Organization (OLADE), Alfonso Blanco, states that Latin America has 25% of renewable energies as primary energy, something that no other region in the world has. But the problem is that they are not being incorporated at the same rate as the increase in energy demand. As a result, these demands continue to be met with traditional fossil fuels.

Current context of the energy transition in Venezuela

The Venezuelan energy industry is currently at historic lows. Due to the fact that gas production and oil exploitation The need for multimillion-dollar investments in infrastructure and transportation will make the industry's recovery a bit longer. But not everything is negative from that perspective, the substantial needs make the moment propitious to explore other ideas in productive and service sectors. Such is the case of renewable energies, especially in the aspect of hydroelectric expansion and adaptation to solar and wind energy.

On the other hand, according to the World Economic Forum's Energy Transition Index 2021Venezuela is ranked 111th out of 115 countries. So it becomes evident that this country is still focused on hydrocarbon exploitation, despite having agreed in 2015 with the decarbonization pathway of the global energy system. Therefore, there is a lack of transition processes, such as institutional strength and governance, preparation of talents and human resources, political commitment, among others. Thus, there is a need to establish public and private mechanisms to ensure training in these areas in order to catch up with the transition.

Opportunities and challenges of the energy transition in Venezuela

Venezuela is a country highly dependent on fossil fuels, in addition to the fact that this is the nation's main source of income. But there is a segment, specifically in the hydroelectric power market, that already has part of the transition assured. Recall that 85% of the country's electricity production comes from hydroelectric power plants, and the remaining demand is supplied by thermoelectric plants powered by coal, diesel and others. This is why in terms of renewable energy, hydroelectric power is the only source that works in the country.

In the case of cleaner energies, gas could be prioritized over oil extraction in the territory. In fact, experts affirm that if the necessary investments can be made by 2030, it is possible to to double gas production in VenezuelaThe company will supply the domestic market and export the surplus to Trinidad and Tobago, Aruba and Curacao in the short and medium term. This would result in long-term contracts, since those who require these resources need security of supply.

On the other hand, the Venezuelan government announced in 2020 the construction of the first photovoltaic project to strengthen the national electricity system. Although it has not been developed due to the suspension of investments after the pandemic, operations began in 2021 in the state of Guárico. This solar energy system plans to satisfy the surplus energy demand that cannot be covered by the hydroelectric plants. Counting with the support and investment of companies such as Solinal CA, Ingesol CA, Siemens Gamesa Renewable Energy SA, Andritz AG and Corpoelec, according to data from Mordor Intelligence.

How to consolidate the energy transition in the Venezuelan market?

While much political will is required, the energy industry can take advantage of its shortcomings to absorb other competencies that will allow it to begin the transition. Taking the experience of companies that have chosen to transform from "hydrocarbon companies to energy companies" in the medium term with great benefits. Therefore, it is necessary to have efficient State policies that guarantee the ideal space to carry out these transitions. Because in order to favor innovation and investment, it is necessary to have the necessary legal security to mitigate the associated risks. Likewise, planning by sectors can generate a macro plan to guide this energy transition in the short and medium term.

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