March 16, 2017

Latin America’s CNG Sector Remains Stagnant

Stratas Advisors

This excerpt is from a report that is available to subscribers of Stratas Advisors’ Global Alternative Fuels and Latin America services.

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Latin America’s vast proven natural gas reserves are primarily used for electricity generation, although some countries have developed compressed natural gas (CNG) as an alternative transportation fuel to reduce dependence on liquid fossil fuels. Other countries have the potential to use CNG as an alternative fuel, but the initial stages of development have not made CNG a contributor in the transportation fuel mix. More than 5 million vehicles in the region were running on CNG in 2016. However, the conversion rate has stabilized in recent years, with CNG’s share of the total fleet fluctuating around 7% since 2006.

Latin America saw its natural gas vehicle (NGV) golden age from 2002-2004, which was motivated by a boost of the sector in Argentina and Brazil. Since then, conversions have slowed down, reaching its lowest point in 2009. The sector has recovered since, although growth has been anemic.

Figure 1 here

The NGV sectors in Argentina and Brazil are the most developed in the region, with a total fleet of around 1.8 million NGVs in each country. Policies subsidizing CNG prices and conversion kits boosted the sector in both countries. These vehicles are primarily used as passenger cars in Argentina and taxis in Brazil, especially in the metropolitan areas of Buenos Aires, Rio de Janeiro and São Paulo. Bolivia has also grown its fleet and service station networks, motivated by large natural gas production. Colombia and Peru are also taking steps toward consolidating CNG in the fuel mix, supported by natural gas supply and government initiatives. Venezuela’s industry grew quickly, but a deteriorating economy and poor investment in the energy sector have affected its future, while Trinidad and Tobago’s NGV sector is still in the early stages.

Each country in the region has a different degree of natural gas self-sufficiency. Higher consumption was a general trend in 2015 against 2014, with Colombia and Peru remaining self-sufficient, and Trinidad and Tobago continued its role as an exporter to its neighbors. Argentina and Brazil have long-term agreements to import natural gas from Bolivia, a producer and exporter.

Key Takeaways

• NGV conversions stagnated throughout Latin America as noncompetitive CNG prices and insufficient network of service stations hindered the sector’s development;

• Brazil’s and Peru’s CNG markets have saturated, while Argentina faces pressure from natural gas imports as the CNG market is supposed to use domestic production and demand from other sectors is hindering CNG expansion;

• Bolivia and Colombia have experienced growth in their CNG markets as governments continue to support the sector; and

• The markets in Venezuela and Trinidad & Tobago continue to develop despite current policies that hinder CNG growth. 


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