The Obama administration will be touting the benefits of the shale gas revolution on Wednesday at an international summit with Latin American countries on transitioning the hemisphere to U.S. gas imports , a senior administration energy adviser said Tuesday.
“I don’t think the administration is agnostic” on natural gas, said Amos Hochstein, special envoy and energy coordinator at the State Department, at a Tuesday event hosted by the Atlantic Council. “I think the role of natural gas is critically important.”
He and Vice President Joe Biden will be hosting a summit Wednesday with Caribbean and Central American countries to discuss a way to wean them off Venezuelan oil, given that the member of the Organization of the Petroleum Exporting Countries is in crisis, and switch them to cleaner natural gas and eventually more renewables. But natural gas will be the focus, Hochstein said.
“If you look at not rhetoric but action, the administration has taken significant actions to allow for natural gas exports,” he said. “To support the region on natural gas, to support the industry and we will continue to do that.”
Hochstein said renewables are multiple decades away from being a reliable source of energy in the hemisphere. But cheap natural gas solves the energy security problem faced in the region, along with meeting climate change goals of lowering greenhouse gas emissions.
“I believe, and I think the administration believes, that natural gas is a great transition fuel as we move from a world of coal and fuel oil toward a world of renewables,” he said. “But that’s going to be a long transition, a multi-decade transition, and natural gas is a perfect fuel for us to encourage.”
He said a State Department task force will send a report to President Obama Wednesday, and “natural gas is definitely mentioned in there.”
The summit also will discuss the development of a massive transmission system that Hochstein envisions connecting Central America to Mexico and then southward to Colombia and the Caribbean to distribute the electricity generated from natural gas.
The task force report also is focused on the implications of low oil prices for Central America and the Caribbean and the need to wean the region off Venezuelan oil and develop low-carbon resources.
“The concern is that we have a double issue here,” Hochstein said. “One, is that the Caribbean is highly dependent on one supplier,” which is Venezuela, he said.
“What we have been trying to do in the administration over the last many years is move a concept not only in this region but around the world that no country should be dependent on one supplier. Whether it’s in Europe, in the Caribbean or Central America or elsewhere in the world.”
It is a “clear dependence issue that leads to an economic and political instability potential in the future,” Hochstein said.It is also a climate issue, he said.
“If you have islands that almost have 12 months of sun, many of them have wind potential, many of them have geothermal potential, some have the scale and size for natural gas. It was a shame to be dependent on Venezuelan oil,” he said.
“And more importantly, on the debt structure that they were committing themselves to through the PetroCaribe,” the Venezuelan oil company.
Hochstein said the report will provide recommendations on how to deal with the region’s dependence on PetroCaribe, given that low oil prices have caused the Venezuelan government that backs it to spiral to near collapse in recent months.
“It’s not just a Venezuela collapsing issue,” he said. “PetroCaribe is down right now. But that’s because oil prices are down. But if oil prices go up … we are right back in this cycle of increasing debt at a time when Venezuela will not be able to afford it.”
He says countries are used to racking up debt using the company’s credit system to buy oil from Venezuela at low interest rates. But they are being lulled into a false sense of security, he said.
“It doesn’t make any sense for any country in this region to maintain this structure,” Hochstein said. “Most people don’t understand what PetroCaribe is. You can get oil anywhere,” but PetroCaribe makes a country “addicted to this credit system, and you become indebted to it.” That’s the problem, he said.
“You lose your credit rating for your level of debt,” he said, and “nobody will sell you that fuel oil if there is a crisis.”
He said if low oil prices continue to bash the Venezuelan government, and its oil company can no longer support other countries’ debt, then the whole region would start to unravel.
“What I’m trying to convey at tomorrow’s summit … is that we don’t have time,” Hochstein said. “If we don’t have higher oil prices, Venezuela is going to have a harder time governing itself, let alone supporting its neighbors.”
