South America’s Energy Project Bonanza

By Simon West

In a bid to capitalize on abundant natural resources, lure much-needed investment and meet climate goals, countries in South America are diversifying their energy sources, with breakbulk and project cargo looking forward to a surge in cargo-carrying opportunities in sectors such as renewables, nuclear and carbon capture.

According to the Energy Industries Council, the UK’s largest energy supply chain trade association, 1,287 energy projects across all sectors are slated to start up by 2030, a construction drive calling for US$1.07 trillion in capital expenditure by the end of the decade.

Renewables dominate the landscape, with 745 utility-scale clean power projects – or 58 percent of total energy projects – expected to come online by 2030. Capex in the sector will reach US$612 billion, or 57 percent of total expenditure, the EIC said.

In a region renowned for its massive hydropower capacity, the project pipeline is now being led by offshore wind, with Pietro Ferreira, senior regional analyst for the Americas at the EIC, pinpointing Brazil and Colombia with the most potential.

“Both countries have already attracted major developers, with projects in the licensing stage,” Ferreira told Breakbulk. “This is particularly exciting as the offshore wind market provides diversification opportunities for the oil and gas supply chain, including players in the logistics industry.”

In Brazil alone, a mammoth 169 gigawatts, or GW, of capacity has entered the project pipeline.

Developers include established oil majors such as Shell, who earlier this year announced it had applied for a license from Brazil’s environmental agency Ibama for six offshore wind plants with a total installed capacity of 17 GW. Environmental studies are expected to begin this year.

Brazil’s onshore wind energy industry is already one of the fastest growing in the world – some 9,250 wind turbines with a combined installed capacity of more than 22 GW are up and running across 12 states. About 80 percent of Brazil’s 812 wind farms are located in the country’s northeast, a region blessed with near-perfect conditions for powering giant turbines.

Capacity in South America’s largest economy is expected to rise to 37 GW by 2026, according to wind energy association ABEeolica.

Ferreira pointed to strong policies in Brazil that are supporting the buildout, such as frequent renewable energy auctions and mandates, and public financing from Brazil’s development bank, the BNDES.


Chile’s Post-coal World

Chile, meanwhile, one the region’s green pioneers, is looking to generate 70 percent of its electricity from renewables by 2030, a target that calls for plenty of construction work as the nation phases out its coal-fired power stations.

President Gabriel Boric, who took office in March, has made energy transition a top priority, pledging to toughen regulations governing fossil fuels and mining and install 500 megawatts, or MW, of power generated from wind, solar and other clean sources.

According to Ferreira, the Atacama Desert in the north of the country boasts one of the highest irradiation levels in the world, lending the country a huge competitive edge for large-scale photovoltaic, or PV, development.

Projects such as the 480-MW CEME1, billed as the largest solar PV park in Latin America, cement Chile’s status as a global renewable energy powerhouse. Slated to come online in 2023, CEME1 calls for the installation of 860,000 solar panels across more than 400 acres of scorching Atacama wilderness.

Chileans, meanwhile, in September will get the chance to vote on a new constitution, with the future of infrastructure and power industries at stake. One executive speaking to Breakbulk said the country was in “standby” until the results of the plebiscite are known.

“With the new government and the voting, many investors seem to be waiting to see what happens,” said Rodrigo Izquierdo, deputy general manager at Santiago-based Integral Chile.

Colombia has also been busy expanding its onshore wind and solar capacity.

Center-left President Gustavo Petro took office in August with a pledge to ban new fossil fuel projects and focus instead on building green energy generation, giving fresh impetus to an industry already in the ascendency.

Some 16 projects boasting a combined 2.5 GW of capacity are being developed in the arid, northernmost department of La Guajira, where the winds that whistle through the giant cardon cactuses reach speeds at twice the global average.

Colombia’s second utility-scale farm, the 20-MW Guajira I, was brought online in January by private utility Isagen with an investment of US$20 million. Other companies active in La Guajira include Colombia’s Celsia, Italy’s Enel Green Power and US-based AES.


Consultations Cause Delay

The industry, though, has faced some challenges, with sources pointing to the often-protracted public consultations that developers carry out with tribal communities whose lands are located close to proposed installation sites.

Luis Carvajal, general manager at Mammoet Colombia, the heavy-lift specialist that supported the installation of Guajira I’s 10 Vesta turbines, also flagged connectivity issues between La Guajira and the country’s electric grid, although new power lines being built would facilitate the development of new projects.

“We expect the new government to follow the plan of the previous government – encouraging and promoting the use of renewable energy and pushing to overcome regulatory obstacles,” the Bogotá-based executive said.

Elsewhere in the continent, countries such as Peru and Uruguay are also targeting significant renewable buildout in the coming years, while in Bolivia, three utility-scale wind farms with a combined capacity of 108 MW were brought online last year, with state power firm ENDE in the process of launching tenders for others.

Plans are in place to expand Bolivia’s largest wind farm, the 54-MW El Dorado project, by a further 54 MW, part of wider efforts to have more than 2 GW of installed renewable capacity online by 2030, the country’s energy ministry said.

Beyond renewables, Ferreira also pointed to the market potential of gas-fired generation.

According to EIC projections, 210 conventional power projects are slated to begin operations by 2030, or 16 percent of the total project pipeline. The construction drive will call for capex of nearly US$62 billion.

“As the region’s ubiquitous hydro power plants become increasingly less effective as a result of climate change, the deployment of combined cycle power plants for baseload generation has been seen as go-to options to guarantee energy security,” the analyst said.


Still a Place for O&G

Oil and gas, meanwhile, still has a key role in the South American energy matrix, the EIC said, with the sector expected to commit US$316 billion in capex through to 2030. Exploration and production, pipeline, refinery and LNG ventures constitute 21 percent of total energy initiatives, with 266 projects starting up by 2030.

Brazil, again, leads the pack, with projects booming at its pre-salt province off the coast of Rio de Janeiro. State-controlled Petrobras is the dominant force in the development of the reserves – so-called because they are buried beneath thick sheets of salt.

“The company has carried out various field development projects featuring FPSOs (floating production, storage and offloading vessels) over the last decade, focusing on the massive Tupi, Mero and Buzios projects in the Santos basin,” Ferreira said. “And many more will come, as the company’s latest investment plan calls for 15 new FPSOs by 2026.”

Buoyant oil prices, pre-salt’s high productivity, good infrastructure and a raft of industry-friendly reforms – including a new rule four years ago scrapping Petrobras’s mandatory role as sole operator of pre-salt projects – are luring investment, with ambitious field development being undertaken by operators such as Equinor, Shell, Trident Energy, Prio, Enauta, Karoon and Perenco.

“The increasing diversity of players is another key enabler of business opportunities in Brazil’s oil and gas market,” Ferreira said.

Murilo Caldana, project director at Sao Paulo-based freight forwarder FOX Brasil, also pointed to rising demand for logistics support for the construction and transport of the FPSO vessels.

According to Jed Bailey, managing director at Energy Narrative, the long lead time to bring projects online and their 20-25-year operating lives mean current crude prices will have little impact on companies’ investment decisions.

“The high oil prices may allow companies to move more quickly with their drilling plans as capital budgets relax, but the final decision to invest in a major production program will be more influenced by expectations for oil demand in 2030 than by oil prices today,” he said. 

Colombia-based Simon West is senior reporter for Breakbulk. The EIC’s Amanda Duhon will be presenting a breakbulk and project market outlook with a focus on U.S. energy markets at Breakbulk Americas 2022, taking place on Sept. 27-29 at the George R. Brown Convention Center in Houston, Texas.

Image credit: Mammoet