ENERGY SECTOR
JAIME QUIJANDRIA SALMON
THE CENTER FOR LATIN AMERICAN ISSUESTHE GEORGE WASHINGTON UNIVERSITY
JANUARY 28, 2005
PERU
INDEX
• Background
• Energy Balance
• Energy Sector Rewiews 2004
• Energy Sector Perspectives
• Privatization Program
• Electrical Interconnection with neighbors countries
• What is ahead?
• Hydrocarbons
BACKGROUND
PERU POPULATION: 2003
Source: INEI
Rural28%
Urban72%
Total: 27 148 101 inhabitants
Elaboration: OGP / MEM
GROSS DOMESTIC PRODUCT: 2003
Source: BCRPElaboration: OGP / MEM
Manufacturing14%
Mining & Hydrocarbons
7%
Fishing0%
Construction5%
Commerce14%
Other Services51%
Agricultural9%
Total: US$ 60 772 506 Thousands
INFLATION RATE (1990 – 2004)
Source: INEI
Elaboration: Electricity General Directorate / MEM
0
10
20
30
40
50
60
70
80
90
100
110
120
130
140
% 139,2 56,7 39,5 15,4 10,2 11,8 6,5 6,0 3,7 3,8 -0,1 1,5 2,5 3,5
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
ENERGY BALANCE
Source: Net Energy Balance 2003Elaboration: Ministry of Energy and Mines / General Planning Office
PRIMARY ENERGY PRODUCTION: 2003
Total: 451 742 TJ
Crude Oil42,7%
Natural Gas15,9%
Biomass22,3%
Coal0,1%
Hidroenergy18,5%
Solar0,5%
ENERGY CONSUMPTION BY PRODUCTS: 2003 (%)
Total: 448 335 TJ
Hydrocarbons57,9%
Biomass21,0%
Electricity16,2%
Coal, Coque and Industrial
Gas4,4%
Solar0,5%
Source: Net Energy Balance 2003Elaboration: Ministry of Energy and Mines / General Planning Office
ENERGY CONSUMPTION BY SECTOR: 2003 (%)
Source: Net Energy Balance 2003Elaboration: Ministry of Energy and Mines / General Planning Office
Total: 448 335 TJ
Others
3,0%
Mining
9,6%
Transportation
28,8%
Public
1,9%
Industry
17,9%
Commerce
1,8%
Residential
31,7%
Agriculture
2,5%
Fishing
2,9%
GEOTHERMAL POTENTIAL
Elaboration: Technical Energy Bureau – OTERG / MEM
WIND
POTENTIAL
Elaboration: Technical Energy Bureau – OTERG / MEM
SOLAR POTENTIAL
Elaboration: Technical Energy Bureau – OTERG / MEM
ENERGY SECTOR
REVIEWS 2004
ELECTRIC
POWER
SYSTEM
BUSINESS STRUCTURE
* Market Oriented
* Prices are set on a marginal costs basis
Generation
* Regulated
* Price Tag guarantees investment return and O&M Costs
Transmission
* Regulated for public service.
* Tariffs calculated on basis of a model utility.
* Natural monopoly within the “concession area”
Distribution
Free Market
Free Market
Regulated Market
MARKET STRUCTURE
Source: Electricity General Directorate / MEM
OSINERG
INDECOPI
MEMDGE
FISCALIZATION
REGULATION OF RATE SETTING
FREECOMPETITION
NORMATIVEPROMOTERGRANTOR
COES
RELATIONSHIP BETWEEN GENERATION AND TRANSMISSION AGENTS
UTILITIES
CONSUMERS
G, T, D
FREE
REGULATED
STATE
GENERATION – PUBLIC SERVICE 2004
Source: Electricity General Directorate / MEM
ESTATE38%
PRIVATE62%
Total: 5 118 MW
20%
51%80%
49%
-
500
1 000
1 500
2 000
Hydro Thermal
(2 966 MW) (2 151 MW)
MW
ESTATE PRIVATE3 183 MW
1 935 MW
ESTATE44%
PRIVATE56%
Total: 22 609 GW.h
55%
13%
45%
87%
-
2 000
4 000
6 000
8 000
10 000
Hydro Thermal
(17 093 GW.h) (5 516 GW.h)
GW
.h
ESTATE PRIVATE12 581 GW.h
10 028 GW.h
INSTALLED CAPACITY
PRODUCTION
PUBLIC
PUBLIC
TRANSMISSION – PUBLIC SERVICE 2004
Source: Electricity General Directorate / MEM
PRIVATE87%
STATE13%
7 748 km
1 149 km
30%3%
70%
97%
-
1 000
2 000
3 000
4 000
5 000
6 000
220 kV 138 kV
(5 559 km) (3 338 km)
(km
)
STATE PRIVATE
TRANSMISSION LINES (220kV - 138 kV)
TRANSMISSION UTILITIES
Otros
30%
2 687 km
REP
48%
4 256 km
CONENHUA
2%
137 km
ETESELVA
4%
392 km
ISA PERU
4%
394 km
REDESUR
5%
428 km
TRANSMANTARO
7%
603 km
DISTRIBUTION – PUBLIC SERVICE 2004
Source: Electricity General Directorate / MEM
STATE22%
PRIVATE78%
Total: 19 643 GW.h
12%
31%
88%69%
-1 5003 0004 500
6 0007 5009 000
Regulated Free
(10 326 GW.h) (9 317 GW.h)
GW
.h
STATE PRIVATE
15 333 GW.h
4 309 GW.h
2 056 431
1 806 466
PRIVATE47%
STATE53%
Total: 3 862 897
53%47%
15% 85%
-
500 000
1 000 000
1 500 000
2 000 000
2 500 000N°
Regulated Free
(3 862 897) (257)
STATE PRIVATE
NUMBER OF CONSUMERS
ELECTRIC SALES
TOTAL BILLING - 2004STATES vs PRIVATES
Source: Electricity General Directorate / MEM
40% 18%
60%
100%
82%
0
200
400600
800
1 000
1 2001 400
1 600
Generators Transmiters DistributorsU
S$
Th
ou
san
ds
State Private
(1 661) (147) (1 011)
Private
75%
State
25%
US$ 2 112 Thousands
US$ 707 Thousands
Total : US$ 2 819 Thousands
EVOLUTION
INSTALLED CAPACITY (1990 – 2004)(45%)
HIDRÁULICO
TÉRMICO
HYDRO
5 907
THERMAL
Source: Electricity General Directorate / MEM
4 2884 143
HYDRO
THERMAL
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
1 9
90
1 9
91
1 9
92
1 9
93
1 9
94
1 9
95
1 9
96
1 9
97
1 9
98
1 9
99
2 0
00
2 0
01
2 0
02
2 0
03
2 0
04
(MW
)
49%
51%
6 019 MW
4 143 4 288
RATE OF ELECTRIFICATION (1990 – 2004)
Source: OSINERG – GART / MEM
76,376,075,374,973,5
72,070,0
68,066,0
64,961,3
56,854,9
54,652,9
0
10
20
30
40
50
60
70
80
90
1 9
90
1 9
91
1 9
92
1 9
93
1 9
94
1 9
95
1 9
96
1 9
97
1 9
98
1 9
99
2 0
00
2 0
01
2 0
02
2 0
03
2 0
04
PE
RC
EN
TAG
E (
% )
AVERAGE TARIFFS (1993 – 2004)
Source: OSINERG – GART / MEM
5,96
9,709,678,98
10,0410,039,5110,08
11,5211,86
11,36
9,44
5,515,055,105,17
5,575,545,61
4,244,564,784,894,56
7,127,147,437,337,67
7,06
7,63
9,289,629,23
8,767,69
0,00
2,00
4,00
6,00
8,00
10,00
12,00
14,00
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
( c
en
t U
S $
/kW
.h )
Residencial Industrial Comercial
ENERGY SECTOR PERSPECTIVES
POWER BALANCE
MW
Source: Referential Electricity Plan 2003 - 2012Elaboration: Electricity General Directorate / MEM
THERMAL SCENARY
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Año
MW
Existing Hydro Existing Thermal New Hydro New Thermal Demand
NG - CC340 MW
NG - CC 340 MW
HP Poechos 15 MW
TP VentanillaConversion
2 U - 324 MW Natural Gas
TP AguaytiaReinforcement 6 MW
HP Callahuanca-Rehabilitation 3x 2,5 MW
HP Yuncán130 MW
NG - CC 340 MW
VentanillaConversion
CC73 MW
Year Energy (GW.h) Power (MW)
2002 19 659 2 909
2012 29 440 4 157
Rate 4,12% 3,63%
Based Scenary - Demand
PRIVATIZATION PROGRAM
•Law Nº 674 Promotion of Private Investement
•Law Nº 757 Framework for Private Investement
•Law Nº 758 Promotion of Private Investment in Public Services.
•Law Nº 26876 Antimonopoly and Antioligopoly Law for the Electric Power Sector
LEGAL FRAMEWORK
PRIVATIZATION PROGRAM : A BALANCE
Between 1993 and 2004, 2 805 US$ million in private investments have been registered in the electric power system.
In 1992 a 25% of the electric demand was unattended. Today we have a system´s reserve of 42%.
Important improvements in efficiency: distribution energy losses went down from 22% to 8,7%.
There are no more energy shortages that used to severly affect production.
Source: Electricity General Directorate / MEM
INVESTMENT IN THE POWER SECTOR(Generation, Transmission and Distribution)
1990 - 2004
137115
164 167
79
155177
208 203 202
166
95110 111
7266
340359
508
440
211
132
81 95
137115
164 167140
221
373
548 562
710
606
306
242
192167
60
196
0
100
200
300
400
500
600
700
800
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
US
$ (
Mil
lio
n)'
State Private Total
Source: Electricity General Directorate / MEM
INVESTMENT IN THE POWER SECTOR1993 -2004
STATE US$ (million)
PRIVATE US$ (million)
TOTAL
GENERATION 1 078 1 424 2 502TRANSMISSION 212 416 628DISTRIBUTION 724 965 1 689TOTAL 2 014 2 805 4 819
ELECTRICAL INTERCONNECTION WITH NEIGHBORS COUNTRIES
Possible Electrical Links With Neighbors
Possible Electrical Links With Neighbors :Best Chances
• Ecuador• Bolivia• Chile• Grid Topology and geographical
conditions make links with Colombia and Brazil uneconomical by the moment.
INTERCONNECTION WITH ECUADOR
Ecuador
Chiclayo
Piura
Talara
Carhuaquero
Cajamarca
Perú
ZorritosLoja
Paute
CuencaMachala
Guayaquil
Sta. Elena
Milagro
Pascuales
Zarumilla
San Ildefonso
WHAT IS AHEAD?
Goal:
•Improve the Electrical Concessions Law and its Regulations in order to
consolidate the Sector´s Reform started in 1993.
WHAT IS AHEAD?
• Short Term – Adjustments to the regulatory model
for generation and distribution
• Medium Term– Conceptual changes in the model for
regulated prices of energy– New model for transmmission
remuneration
SHORT TERM
• Generation: adjustments aimed to increase predictability and fairness of the tariff.– Regulated Price Energy Price:
Projection period reduced from 4 to 2 years plus taking in account last year.
– Only one regulation per year instead of two as before.
SHORT TERM
• Distribution: adjustments aimed to maintain profitability of 12% as stated in Electrical Concessiones Law– Allowed level of energy losses– Special geographical and weather
conditions taken in consideration– Changes in the ideal company model– Develop new generating and power
transmission projects.
MEDIUM TERM
• Generation:– Deregulation of the energy price:
price for households and small industry-commerce resulting from public bids amongst present and future new generators
– Natural gas promotion for electric power generating
MEDIUM TERM
• Transmission:– Design of a whole new model. World –
class experts hired to propose a conceptual change aimed to ensure the growth of the system as well as the development of new international links.
HYDROCARBONS
• The year 2004 will be known as the year that Camisea became a reality.
• The Challenge we have now is to reach the massive use of gas, and for that is necesary to coordinate actions between the government of Perú and the private sector.
• The great future proyect is to began the exportation of LNG that means investments of US$ 2000 millions.
• This year will be remembered for the unprecedent rise of oil prices, that forced to the Ministry to design mechanisms to reduce the impact on the consumers.
Hydrocarbon Sub-Sector in 2004
The project was finished on time. On august 20th, 2004 the commercial operation of pipelines to transport natural gas, liquids of natural gas, and distribution grids of natural gas in Lima and Callao began. The consortium have invested US$ 1500 million in the construction of project facilities, US$ 600 million of which have been used in local supplies.
CAMISEA PROJECT
US$ 730 millions have been invested in the field facilities, US$ 670 millions for pipelines of gas and liquids from Camisea to the coast, and US$ 56 millions in the distribution grids of natural gas in Lima and Callao.
8 rights of way were given to allow the construction and installation of the gas pipelines from Camisea in favor of Pluspetrol (1), Transportadora de Gas Natural del Perú (6) and Gas Natural de Lima y Callao S.R.L. (1).6 of this 8 applications were solved through agreements between the concessionaries and the land owners. The revenues generated as royalties until December reached US$ 52,8 million, and 50% of them is transferred to regions as Canon.
Use of Gas in Electrical Power Generation
The ETEVENSA electric plant (320 MW) was inaugurated in Sept, 2004. It is the first thermal plant to use natural gas as fuel on electricity generation, allowing a low cost of electricity.
Gas as Fuel in Industrial Sector
The so called initial clients, 7 companies that signed the gas purchasing contracts, began to use natural gas bringing down their operative costs and improving their competitive level.
PROMOTION OF REGIONAL PIPELINES
• By Ministerial Resolution, the Ministry of Energy and Mines has granted four (4) concession areas to distribute natural gas through a grid of pipelines, for the implementation of the Regional Pipelines Project. These concessions comprise the total area of the following regions: – Ayacucho– Cusco– Ica– Junín.
ALTERNATIVE ROUTES FOR REGIONAL GAS PIPELINES
General Development Plan : 2004 – 2005
Type of client Industrial Area Residential and Commercial Area
Potential Clients 183 20,602Source: GNLC
In the next 6 years, no less than 70 000 clients must be using natural gas in the metropolitan area of Lima (Distribution BOOT Contract).
DEVELOPMENT OF NATURAL GAS DISTRIBUTION IN METROPOLITAN AREA
OF LIMA
General Development Plan : 2004 - 2009
Source: GNLC
Use of Natural Gas on Transportation
The Vehicular Natural Gas (VNG) is used as fuel in vehicles with internal combustion motors.
It replaces gasolines and its advantage is its high octane rating (approx.120 octane number), lower cost and lower incidence in enviromental pollution.
The Ministry of Energy and Mines is about to publish the Regulations for using Vehicular Natural Gas that allows this develoment.
Liquified Natural Gas (LNG)
The liquified natural gas is obtained from a cooling process (criogenic process) in which its temperature goes down to–161°C, with the reduction of its volume in six hundred times for its further exportation to the consumption centers.
.
Reference price / US market
Domestic Grid
LNG
Transport:
$US 650 MM
Transport:
$US 650 MM
Regasification: $US 500 MM
Regasification: $US 500 MM
Liquefaction:
$US 1,100 MM
Liquefaction:
$US 1,100 MM
Duct Expansion: $US 500 MM
Duct Expansion: $US 500 MM
Lote 56`s Development: $US 550 MM
Lote 56`s Development: $US 550 MM
Chain of Value of LNG - An investment in excess of US$ 2 000 million