Peru has pledged to develop policies to ramp up its share of renewable energy sources from current share of 5.5 per cent to at least 20 per cent by 2040.
While laudable, the country requires significant capital investments to increase its natural gas production as well as the share of low-carbon energy sources in the country’s overall mix, GlobalData indicates.
According to leading Data and Analytics Company, the newly elected President of Peru, Pedro Castillo, appears strongly committed to support the involvement of private sector in energy projects. Following its defined National Energy Plan 2010-2040, the country has been establishing the legal framework that is aimed to promote private investment in the sector.
In September 2021, Peru generated 258 GWh of electricity from non-conventional renewable energy sources, representing a decline by 14 per cent on a year-on-year basis.
The non-conventional renewables including wind, solar and bioenergy plants collectively produced 5.5 per cent of the nation’s power, a reduction from a 6.4 per cent share achieved in August 2021.
Only last month, the Ministry of Energy and Mines gave authorizations for the development of 20 geothermal projects. The Ministry has said that by 2026 a high percentage of electricity service coverage will be achieved in the country’s border areas through 32 projects from renewable energies.
Demand for Peruvian Natural Gas to grow in 2022
Svetlana Doh, Oil and Gas Analyst at GlobalData commented:
“While electricity generation in the country is considered more or less clean, as it is sourced from natural gas and hydropower primarily, oil consumption by all the sectors altogether is high and roughly accounts for 50%. So, until other renewable resources could contribute the required amount of energy, growing natural gas production still stays very important…
“[Natural gas] consumption could grow and partially replace oil utilization in industrial use, residential and power generation.”
Svetlana Doh, Oil and Gas Analyst
Given current projections, natural gas production in Peru is expected to grow by 3.4 per cent in 2022, from 1.16 billion cubic feet of gas (bcfd) to 1.20 billion cubic feet of gas. However, in 2023, production is expected to see a decline at an average of 2.1 per cent annually and reach 1.16 bcfd in 2025.
According to Svetlana Doh, an assessment of the country’s National Energy Plan indicated that demand for natural gas will grow from approximately 1.6 bcfd in 2021 to at least 2.4 bcfd in 2025.
A peek at the country’s energy market showed that gas is used in about 22 per cent of the total market, and in order to increase the share of gas, “underexplored gas areas in Peru need to be developed sooner rather than later.”
Accordingly, GlobalData suggests that more aggressive exploration work needs to be conducted as there have been no significant discoveries in the country since 2014, and offshore blocks are significantly under explored.
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