August 2021 – @alvaroriosroca – In May 2021, the International Energy Agency (IEA) launched a report entitled “Net Zero by 2050 – A Roadmap for the Global Energy Sector”. This report shocked much of the global energy community with its drastic, irresponsible and unenforceable nature.
The IEA report, in its concluding section, indicates that “as of 2021, no new investments in hydrocarbon exploration and exploitation should be approved or necessary at a global level to reach the goal of Net Zero Carbon by 2050”. Undoubtedly an ambitious plan, but we believe it is only in the interest of some of the member countries of this organization. We will explain why.
Let’s start by saying that the IEA is a Paris-based organization with 30 member countries. Almost all of them are developed countries and 8 associate members, among them Brazil, China and India. It is worth noting that the only Latin American member country is Mexico and believe us it is because of having the USA as a neighbor.
The problem with this type of reports coming from these important agencies is that they exert a powerful influence on the politicians of the day, on the population and therefore on public policies. They also exert considerable influence on financiers and those who invest capital in investments. In the case at hand, it would be a matter of stopping much-needed investments in exploration and exploitation or at least drastically cutting back or stopping them.
This is without taking into account the serious disruptions that this could have on prices, security of supply, the economy and, above all, the impact on many developing countries, including several in our region. We are surprised, for example, that the report is not more realistic and pragmatic and proposes tangible issues with a direct impact on emissions reduction. For example, accelerate as much as possible the conversion of existing coal-fired power plants and replace them with natural gas in many countries around the world.
Remember that by 2019 the USA generated 23% of its electricity with coal, the European Union generated 16% and China 65%. Latin America has a hydro and thermal base with natural gas being one of the least emitting regions of the planet with 5% of its electricity generation with coal.
But if natural gas is not explored and sought from 2021 onwards as proposed by the EIA, we wonder with what we would replace all this existing coal-fired generation and the new generation to come. Let them not tell us the story that they will be able to do it with solar or wind energy, which because of their intermittency need backup and also because of the level of investment that would be required in the entire chain, including transmission and distribution systems. And neither with green hydrogen as some countries and technology developers would like because it is still very expensive and there is no commercial infrastructure.
It is possible to do a whole analysis for petroleum, but I will leave it to the imagination of our dear readers to imagine a day without diesel, gasoline, jet fuel, etc. Etc. Etc. And may they also imagine a day without the precious plastics produced by the petrochemical industry, all derived from hydrocarbons and natural gas in particular.
Focusing on the region, it is important to remember that the economies of several of our countries are still heavily dependent on income from the production and export of oil and natural gas, such as Ecuador, Colombia, Venezuela, Bolivia, Brazil, Mexico, Guyana, Suriname and Argentina. What does the IEA want the resources of Vaca Muerta and the Pre-Salt to remain in the ground, even though they are still so necessary?
For all of the above and for what we cannot explain because space does not allow us to do so, we reiterate that the IEA Report was biased, self-serving, irresponsible and inapplicable. Energy transition yes, but not at any cost.
- Former Minister of Hydrocarbons of Bolivia and current Managing Partner of Gas Energy Latin America.