The war between Russia and Ukraine has shown an immediate effect on the world´s economy, causing oil prices to rise above 100 dollars a barrel and sowing uncertainty about energy security in almost all countries and particularly in Europe.
EDICIÓN 104 | 2022
Elizabeth Riva Álvarez
In the ongoing war, Russia is the main oil & gas producer of Europe (40%), and Ukraine has the largest distribution pipelines through which about a third of those resources flow to the old continent, in the middle of a tense relationship of permanent dependence that is now dangerously unstable and is generating shock waves that coupled with an irreversible humanitarian crisis, the situation is turning the world on its knees.
In this context, Bolivia is not on the sidelines, indeed, it is beginning to feel the direct effects of fuel imports, according to analysts Renán Orellana, a former World Bank (WB) and Inter-American Development Bank (IDB) consultant, and Sergio Arnéz, Head of Guabirá Energía, both of them contributors of ENERGÍABolivia´s monthly colloquium.
Energy security, understood as the action of the State aimed to warranty the energy supply in a permanent, environmentally and economically sustainable manner, is directly related to the development and renewal of energy sources, the development of supply networks and the efficient management of resources.
According to Mr. Orellana, the current conflict in Eastern Europe is forcing countries to find new internal strategies and emphasize actions to improve their energy security. This could lead to greater interest in the development of renewable energies, which requires time, and on the other hand, the development of traditional energies such as natural gas, which is considered a transition fuel.
Sergio Arnéz believes that this war is revealing the weaknesses that Western Europe has with respect to its energy supply, assuring that this can trigger a greater impulse in favor of renewable energies, but also, possibly, the return to nuclear energy, since the production of renewable energy demands a lot of time and resources, variables that exert a lot of pressure in a moment in history where the world is running out of time in order to address climate change.
LATIN AMERICA
Both analysts were asked if they believed that as a result of the current conflict between Russia and Ukraine, trade relations in Latin America and particularly in South America, based on their energy dependencies, could be deteriorated and escalate into a military confrontation considering the traditionally “imperial” profile of Brazil, both agreed to point out that this scenarios is extremely “unlikely”.
“There has been talks about Brazil and the Brazilian sub-imperialism in recent years, which is possibly due to the size of that country and its need for energy resources that have to be satisfied by other countries, but these are different realities, Russia has enough resources to export, while Brazil must negotiate with its neighbors to meet its energy needs (…) I believe that we will never reach to a situation similar to what is currently happening in Europe,” said Renán Orellana.
BOLIVIA
In Bolivia, one of the biggest threats to energy security is related to fuel imports, which are increasing permanently, demanding more and more foreign currency to buy these fuels. “Most of our energy matrix is based on gasoline, diesel and natural gas, and there is where we have a great weakness: we import 70% of diesel and 50% of gasoline, notwithstanding, this is a serious problem for the Bolivian economy, because these imports are very expensive. As a matter of fact, last year alone, fuel import expenses have practically drained the income generated from natural gas exports, “ Sergio Arnéz said.
He said that this situation obliges us to accelerate the substitution of these imports, beginning with a gradual replacement of these imports based on local production of biofuels for gasoline and diesel, as well as the development of more renewable energy sources to replace natural gas consumption, considering that domestic production and exports are also declining.
“According to my calculations, making a projection of production and domestic demand, both curves are going to cross in the next 10 to 15 years if the pace of production and consumption remain the same. Therefore, innovative and powerful actions must be taken in the short term,” he added.
EFFECTS OF WAR
Arnéz pointed out that the rise in international oil prices due to the war, could potentially affects Bolivia in two ways: positive and negative. The price of gas that we export goes up, but the price of fuels imports also goes up. “Then there is no real effect, what is lost in imports is what is gained in exports, as long as we continue to depend on fossil fuels,” added Renán Orellana.
They agreed that the change that is needed is towards new energy sources, in order to reduce the country´s dependence on traditional fuels, although in a responsible manner, considering the characteristics of each energy source, which must be coupled with the capacity to manage resources.
“To achieve a real change, it is also necessary to stop subsidizing natural gas, to remove that kind of addiction that we have to gas. This is causing us harm, it definitively distorts the market and does not facilitate changes, it does not encourage new projects, and even if new projects are developed, we still have to continue subsidizing natural gas,” Orellana remarked.
The Bolivian interconnection system is quite robust, thanks to the permanent analysis carried out by ENDE´s National Load Dispatch Committee …”
ELECTRICITY SUPPLY
Orellana considers that in addition to the development of energy sources, distribution and supply must be guaranteed. “In this, the country has a great limitation, particularly in the field of power grids. Bolivia is an island in terms of power grids, we do not have any international interconnection, therefore, this situation highlights the reality of a weak infrastructure that affects energy security”. In the analyst´s opinion, a former consultant of the World Bank and IDB, the National Interconnected System (SIN) shows the same weakness, with power lines that are overloaded in some sections, very low voltages and lack of infrastructure, a set of variables that affect energy security.
According to Orellana, in order to overcome these problems in the electrical sector, there is a need for “political decisions, agreements between countries interested in energy exchange under equal and fair conditions, which must be coupled with technology solutions that have to be offered to fulfill the requirements and complexities that arise within a long-term vision.
CAPACITY
Sergio Arnéz differs from the criteria stated by Orellana regarding to the electricity sector. He considers that: “The National Interconnection System is quite robust, thanks to the permanent analysis carried out by the National Load Dispatch Committee and ENDE Transmission, an entity that is permanently evaluating needs and potential problems.”
“Regarding to the electricity exports, the Termoeléctrica del Sur plant has been built as an energy hub, conceived precisely to satisfy the Argentinian market, but I fully agree that a commercial agreement must be signed first, in this case it was not like that, the thermoelectric plant was built first and the transmission line is not yet completed, however, the gas needed to operate this plant is negligible, and the project will certainly bring many benefits to the country, the most important benefit is the diversification of exports, “he said.
However, observations persist regarding to the national and regional interconnection, which requires improvements in order to achieve efficient energy transmission, so there is a lot of work to be done, both experts agreed.
