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ENERGY SECTOR

ENERGY SECTOR. PERU. JAIME QUIJANDRIA SALMON THE CENTER FOR LATIN AMERICAN ISSUES THE GEORGE WASHINGTON UNIVERSITY JANUARY 28, 2005. INDEX. Background Energy Balance Energy Sector Rewiews 2004 Energy Sector Perspectives Privatization Program

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ENERGY SECTOR

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  1. ENERGY SECTOR PERU JAIME QUIJANDRIA SALMON THE CENTER FOR LATIN AMERICAN ISSUES THE GEORGE WASHINGTON UNIVERSITY JANUARY 28, 2005

  2. INDEX • Background • Energy Balance • Energy Sector Rewiews 2004 • Energy Sector Perspectives • Privatization Program • Electrical Interconnection with neighbors countries • What is ahead? • Hydrocarbons

  3. BACKGROUND

  4. Rural 28% Urban 72% Total: 27 148 101 inhabitants PERU POPULATION: 2003 Source: INEI Elaboration: OGP / MEM

  5. GROSS DOMESTIC PRODUCT: 2003 Total: US$ 60 772 506 Thousands Source: BCRP Elaboration: OGP / MEM

  6. INFLATION RATE (1990 – 2004) Source: INEI Elaboration: Electricity General Directorate / MEM

  7. ENERGY BALANCE

  8. Biomass Crude Oil 22,3% 42,7% Solar 0,5% Hidroenergy Coal 18,5% Natural Gas 0,1% 15,9% Total: 451 742 TJ PRIMARY ENERGY PRODUCTION: 2003 Source: Net Energy Balance 2003 Elaboration: Ministry of Energy and Mines / General Planning Office

  9. Coal, Coque and Industrial Gas Solar Electricity 4,4% 0,5% 16,2% Hydrocarbons 57,9% Biomass 21,0% Total: 448 335 TJ ENERGY CONSUMPTION BY PRODUCTS: 2003 (%) Source: Net Energy Balance 2003 Elaboration: Ministry of Energy and Mines / General Planning Office

  10. Agriculture 2,5% Others Industry Fishing 3,0% 17,9% 2,9% Residential 31,7% Commerce 1,8% Public Transportation 1,9% 28,8% Mining 9,6% Total: 448 335 TJ ENERGY CONSUMPTION BY SECTOR: 2003 (%) Source: Net Energy Balance 2003 Elaboration: Ministry of Energy and Mines / General Planning Office

  11. GEOTHERMAL POTENTIAL Elaboration: Technical Energy Bureau – OTERG / MEM

  12. WIND POTENTIAL Elaboration: Technical Energy Bureau – OTERG / MEM

  13. SOLAR POTENTIAL Elaboration: Technical Energy Bureau – OTERG / MEM

  14. ENERGY SECTOR REVIEWS 2004

  15. ELECTRIC POWER SYSTEM

  16. BUSINESS STRUCTURE Transmission Distribution Generation Free Market Regulated Market Free Market * Regulated for public service. * Tariffs calculated on basis of a model utility. * Natural monopoly within the “concession area” * Market Oriented * Prices are set on a marginal costs basis * Regulated * Price Tag guarantees investment return and O&M Costs

  17. STATE NORMATIVE PROMOTER GRANTOR MEM DGE OSINERG REGULATION OF RATE SETTING FISCALIZATION INDECOPI FREE COMPETITION UTILITIES COES RELATIONSHIP BETWEEN GENERATION AND TRANSMISSION AGENTS G, T, D CONSUMERS FREE REGULATED MARKET STRUCTURE Source: Electricity General Directorate / MEM

  18. GENERATION – PUBLIC SERVICE 2004 INSTALLED CAPACITY PUBLIC PRODUCTION PUBLIC Source: Electricity General Directorate / MEM

  19. REP Otros 48% 30% 4 256 km 2 687 km CONENHUA 2% 137 km TRANSMANTARO ISA PERU 7% REDESUR 4% ETESELVA 603 km 5% 394 km 4% 428 km 392 km TRANSMISSION – PUBLIC SERVICE 2004 TRANSMISSION LINES (220kV - 138 kV) TRANSMISSION UTILITIES Source: Electricity General Directorate / MEM

  20. DISTRIBUTION – PUBLIC SERVICE 2004 ELECTRIC SALES NUMBER OF CONSUMERS Source: Electricity General Directorate / MEM

  21. State 1 600 82% 25% 1 400 US$ 707 Thousands 1 200 1 000 US$ Thousands 800 60% 600 40% 18% 400 Private 100% 200 75% US$ 2 112 Thousands 0 Generators Transmiters Distributors (1 661) (147) (1 011) Total : US$ 2 819 Thousands State Private TOTAL BILLING - 2004 STATES vs PRIVATES Source: Electricity General Directorate / MEM

  22. EVOLUTION

  23. INSTALLED CAPACITY (1990 – 2004) (45%) 5907 4 288 4 143 THERMAL TÉRMICO HYDRO HIDRÁULICO Source: Electricity General Directorate / MEM

  24. RATE OF ELECTRIFICATION (1990 – 2004) Source: OSINERG – GART / MEM

  25. AVERAGE TARIFFS (1993 – 2004) Source: OSINERG – GART / MEM

  26. ENERGY SECTOR PERSPECTIVES

  27. POWER BALANCE THERMAL SCENARY MW Source: Referential Electricity Plan 2003 - 2012 Elaboration: Electricity General Directorate / MEM

  28. PRIVATIZATION PROGRAM

  29. LEGALFRAMEWORK • 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

  30. 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.

  31. INVESTMENT IN THE POWER SECTOR (Generation, Transmission and Distribution) 1990 - 2004 Source: Electricity General Directorate / MEM

  32. INVESTMENT IN THE POWER SECTOR 1993 -2004 Source: Electricity General Directorate / MEM

  33. ELECTRICAL INTERCONNECTION WITH NEIGHBORS COUNTRIES

  34. Possible Electrical Links With Neighbors

  35. 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.

  36. Ecuador Pascuales Sta . Elena Guayaquil Milagro Paute San Ildefonso Machala Cuenca Zorritos Loja Zarumilla Talara Perú Piura Carhuaquero Chiclayo Cajamarca INTERCONNECTION WITH ECUADOR

  37. WHAT IS AHEAD?

  38. Goal: Improve the ElectricalConcessions Law and its Regulations in order to consolidate the Sector´s Reform started in 1993.

  39. 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

  40. 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.

  41. 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.

  42. 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

  43. 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.

  44. HYDROCARBONS

  45. Hydrocarbon Sub-Sector in 2004 • 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.

  46. CAMISEAPROJECT 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.

  47. 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.

  48. 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.

  49. 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.

  50. 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.

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