Natural gas market outlook: how Latin America and the Caribbean can benefit from the US shale boom

Natural gas market outlook: how Latin America and the Caribbean can benefit from the US shale boom

The surge in US natural gas production from the shale boom is transforming global gas markets. Less than a decade ago, with natural gas production on the decline, the United States was expected to become a major importer of liquefied natural gas (LNG) and a “last resort” market for surplus cargos around the world. But today, thanks to an increase in shale gas output, the United States is poised to become a significant supplier of gas to international markets. Export pipelines are being rapidly built, and LNG facilities once designed to receive imports are now being converted to export terminals.

Across Latin America and the Caribbean, countries that have faced chronic shortages of natural gas stand to benefit from this surplus. Despite holding significant natural gas reserves, the region remains a net importer.

Gas demand is rising in most countries, fueled by economic growth and subsidized electricity prices that encourage consumption. Many oil-fired power plants are being converted to burn cheaper and cleaner natural gas. Social and environmental opposition to new hydroelectric projects has also hastened the move toward gas. Natural gas is increasingly used to back up intermittent renewable energy sources, including wind and solar.

Increased US gas exports to Latin America and the Caribbean, as well as lower prices tied to the flood of US exports, could contribute to lower electricity prices, reduced carbon emissions and more secure energy supplies in the region. Cheaper and more abundant natural gas could further encourage countries to switch to gas for power generation and advance the transition to natural gas vehicles.

Latin America can hasten the transition to natural gas and exploit the benefits of US gas exports by further expanding energy integration, including pipeline infrastructure and electrical grids. Mexico’s increased imports of US gas will depend on the growth of cross-border pipeline infrastructure, while Central America and the Caribbean can benefit from US gas exports by improving electrical grid integration. As global gas trade grows in the coming decades, Latin American and Caribbean importers stand to benefit from the imminent increase in US natural gas exports.

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